Labour delivers on its 2024 manifesto to end North Sea licensing

As previously signalled by the government, a new form of permission called a ‘transitional energy certificate’ (TEC) is to be introduced. This is designed to enable development of resources in areas near to existing fields and infrastructure. TECs would also be able to be used where there is incidental oil or gas production arising from non-oil and gas activities licenced under other regimes, such as gas storage or carbon capture and storage. The TEC regime will be administered by the North Sea Transition Authority (NSTA).  

Under the Bill (342 page / 14.7MB PDF), the NSTA would be able to issue a TEC granting exclusive rights to search and bore for and get petroleum if it considers that two key conditions have been met. 

The first condition is geographic and requires that the area to which the proposed TEC relates must border or be in close proximity to an existing field, all or part of the existing field must already be licenced, and it must be possible to install infrastructure to connect the area subject to the TEC to infrastructure in the existing field. Alternatively, the TEC would have to relate to an area which is within a field and another part of that field has already been licenced. “Close proximity” is not defined. 

The second condition has three elements. First, the activity under the TEC could not relate to exploring for a field which has not already been discovered whether by invasive techniques such as exploration drilling or non-invasive techniques like seismic surveys. Second, issuing the TEC would need to support the on-going management and economic viability of an existing field. Third, the applicant would need to be a fit and proper person. 

Separately, the Bill contains additional provisions relating to the NSTA grant of consent to “search for petroleum” in an otherwise unapproved area. Oil and gas expert Chris Sawyer of Pinsent Masons said it appears these provisions are to enable activity previously carried out under exploration licences, which would no longer be able to be issued. 

To benefit from such consent, the applicant would have to either hold a TEC, hold a petroleum licence, be authorised outside the UK to search for, bore and get petroleum outside the UK or UK territorial waters, or be the operator of such TEC, licence or overseas authorisation.  

In addition, searching for petroleum would need to be necessary for production from the area covered by that TEC, licence or overseas authorisation to be carried on or carried on more efficiently. 

Any consent issued by the NSTA would need to specify that it permits only “prospecting or carrying out geological surveys by physical or chemical means”. The drilling of wells would not be permitted. In addition, any consent issued by the NSTA would need to specify the area to which the consent relates and would not be able to extend to permitting the carrying on of permitted activities at any point more than 15 kilometres from the boundary of the already approved area or “such greater distance specified in the consent as the NSTA considers necessary”. According to Sawyer, these provisions appear designed to enable the ongoing performance of seismic surveys. 

Sawyer said: “In the week that National Gas, the operator of Britain’s national gas network, confirmed to a parliamentary committee that it is actively talking with the UK government about a strategic gas storage reserve, it remains to be seen whether the TEC provisions will enable any such strategic reserve to be supplied with domestic gas in increased or sustained volumes or whether we will rely on ever-increasing imports. It will be interesting to see how the Bill evolves.