UK Government Introduces Offshore Petroleum Licensing Bill to Boost Energy Security and Net Zero Transition
Posted 10/11/2023 13:50
The UK Department for Energy Security and Net Zero (DESNZ) announced the introduction of the Offshore Petroleum Licensing Bill to Parliament on November 8. The legislation aims to enhance the UK economy, energy security, and facilitate the transition to a net-zero carbon footprint.
Under this bill, annual oil and gas licensing rounds will be mandated, subject to rigorous emissions and imports tests. The domestic oil and gas industry is considered pivotal to the UK's energy security and economy. The regular licensing for exploration is expected to provide increased certainty and investor confidence while fostering energy independence for the UK.
Two key tests must be met under the new regime. Firstly, the UK should remain a net importer of both oil and gas, and secondly, the carbon emissions associated with UK gas production must be lower than the average emissions from imported liquefied natural gas (LNG). This approach aims to reduce reliance on higher-emission imports, as domestic gas production has a significantly lower carbon footprint than imported LNG.
The oil and gas industry, supporting around 200,000 jobs and contributing £16 billion annually to the UK economy, is crucial. Fossil fuel producers are expected to contribute approximately £50 billion in tax over the next five years. The sector also plays a vital role in helping the UK achieve its net-zero target by leveraging existing supply chains, expertise, and key skills for low-carbon industries like tidal power, offshore wind, and carbon capture and storage.
While the government is scaling up domestic clean energy sources, such as offshore wind and nuclear, the UK will continue to rely on oil and gas for its energy needs. The Offshore Petroleum Licensing Bill has completed the first reading stage in the House of Commons and is progressing through subsequent stages.
Claire Coutinho, Secretary of State for Energy Security and Net Zero, emphasized the need for a pragmatic approach to achieve net zero by utilizing homegrown advantages, including oil, gas, wind, and hydrogen from the North Sea. The bill is part of a comprehensive strategy to attract investment in renewable infrastructure and reform grid connections.
Offshore Energies UK (OEUK) CEO David Whitehouse welcomed the government's focus on economic growth and homegrown energy production. He stressed the importance of new licenses to manage the decline of oil and gas production in the North Sea, supporting skilled workers and ensuring compatibility with energy security and net-zero goals.
The recent 33rd Oil and Gas Licensing Round saw 27 licenses offered as part of the ongoing effort to sustain domestic production and avoid heavy dependence on oil and gas imports in the future.