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Offshore oil and gas operators invited to bid for new round of licences to drill in North Sea

Out-Law News | 28 Jan 2014 | 2:29 pm | 1 min. read

Offshore oil and gas companies can now apply for new licences to drill in the North Sea as part of the Government's 28th licensing round.

Energy Minister Michael Fallon said that the Government was expecting to see "extremely high levels of interest" in applications, after the previous licensing round resulted in a record number of licences being awarded.

"There continues to be extremely high levels of interest in North Sea oil and gas, which is unsurprising when there could be as many as 20 billion barrels of oil still buried deep within the seabed," he said. "This new round of drilling for offshore oil and gas will help boost growth, energy security and jobs in the UK."

Applications for licences must be submitted to the Department of Energy and Climate Change (DECC) by 25 April 2014.

The UK Government has previously said that although the UK Continental Shelf (UKCS) is past 'peak production', at least 20 billion more barrels of oil equivalent (boe) could still be produced. It has estimated that oil and gas will continue to provide up to 70% of the UK's primary energy supplies until 2030. Sir Ian Wood, who is currently conducting a review of how best to extract maximum value from the UK's remaining oil and gas supplies, has suggested that an additional four billion boe could be extracted over the next 20 years if the recommendations of his forthcoming final report are implemented.

Recent incentives introduced to boost investment include the introduction of Decommissioning Relief Deeds, to give businesses certainty over the tax relief that they will receive when decommissioning their assets; and new allowances for operators in small fields, large shallow-water gas fields, older 'brownfield' sites and certain unexplored fields in the north west of Scotland.

Last year the UK oil and gas sector attracted a record £14bn of capital expenditure, while 36 new offshore projects were approved. There are now over 50 companies at work in the North Sea following the entry to the market of 21 new licence holders following the 27th licensing round.

Industry body Oil and Gas UK welcomed the Government's announcement, which it said that it hoped would "encourage new applicants as well as established companies".

"Industry needs to work collaboratively with HM Treasury and DECC in a tripartite arrangement as outlined by Sir Ian Wood's recommendations in his interim report," said Oonagh Werngren, Oil and Gas UK's operations director. "We believe this approach ultimately holds the key to the future success of the North Sea."