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The North Sea oil and gas industry is a central part of Scotland’s economy but it has a significant impact on the marine environment.
Oil and gas licences continue to be granted in the North Sea, despite arguments from campaigners and climate scientists that further exploitation of fossil fuels will jeopardise efforts to mitigate climate change.
Ferret Fact Service explains how the new licences are granted.
A licence allows a company to explore and extract oil and gas from a defined area. This can be either offshore or onshore oil and gas sites.
Licences are usually for exploration or production. Exploration licences allow companies to look for fossil fuels that can be extracted within an area, while production licences mean companies can explore and drill for oil or gas.
The North Sea Transition Authority (NSTA) is the UK government body that grants oil and gas licences.
The area where the UK claims the right to exploit fossil fuels is called the UK continental shelf. It includes part of the English Channel and Irish Sea but most of the oil and gas fields are in the North Sea.
Obtaining a licence does not mean a company can immediately start drilling. Companies with licences must apply for various permits and pass tests before they can start producing oil and gas from an area.
The right to exploit fossil fuels is licenced in rounds by the NSTA. Areas, known as blocks, are auctioned off to companies, when a round begins.
The most recent licensing round was opened between October 2022 and January 2023, with 100 production licences made available.
Companies bid against each other to obtain the licences, which are usually granted for a number of years. Firms can then explore the area and decide whether it is worth exploiting. There have been 33 rounds since the 1970s.
Successful bidders must provide timelines and regular progress updates to the NSTA, in order to prove they are attempting to explore oil and gas potential in the block.
A large proportion of the blocks auctioned off will not result in production of oil and gas, and it takes around five years on average between a licence being granted and production starting, for those which are potentially fruitful.
Offshore oil and gas licensing is reserved to the UK Government, while the Scottish Government controls onshore licensing which enabled it to place an effective ban on onshore fracking in Scotland.
The Scottish Government announced a “presumption of no new exploration in the North Sea” as part of its new energy strategy but it does not have the power to stop new licences being granted.
Climate campaigners have criticised the UK Government’s recent licensing round for expanding production of oil and gas despite the escalating climate crisis.
Government ministers have said the new licences will improve the UK’s energy security. Prime Minister Rishi Sunak said: “Even when we reach net zero in 2050, a quarter of our energy needs will still come from oil and gas and domestic gas production has about a quarter or a third of the carbon footprint of imported gas.”
The UK Government’s climate advisor, the Committee on Climate Change, said in its latest progress report in July 2023 that “expansion of fossil fuel production is not in line with net zero”, while Oxfam said the new licences would drive a “wrecking ball through the UK’s climate commitments”.
Main image: iStock/arild lilleboe
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