OEUK: King’s Speech helps lay path to a homegrown net zero

David Whitehouse (OEUK)

OFFSHORE Energies UK, the sector’s leading trade association, has responded to yesterday’s King’s Speech. The speech led on economic growth and outlined the ‘Offshore Petroleum Licensing Bill’ to regularise licensing for the UK’s homegrown oil and gas industry, together with an ambition to attract renewable investment and reform grid connections across the nation. 

Offshore Energies UK CEO David Whitehouse, said:  

Subscribe to our daily newsletter

Why? Free to subscribe, no paywall, daily business news digest.

“Economic growth and homegrown energy production were right at the top of the King’s Speech. This is where they belong as we work together to strengthen our energy security and build our low carbon future.

“As we transition to net zero, the UK mustn’t just become a good place to do energy business, it must become irresistible. The ambition to attract investment in our renewable infrastructure and reform grid connections is important as we work to unlock the full potential of our integrated offshore energy mix – from oil and gas to wind, hydrogen and carbon capture.

“There are currently 284 active oil and gas fields in the North Sea and by 2030 around 180 of those will have ceased production due to natural decline. The industry needs the churn of new licences to ensure no cliff edge in domestic production. OEUK has warned that without fresh investment the UK will be reliant on oil and gas imports for 80% of its needs by 2030.

“Our sector needs new licences to manage the decline of oil and gas production in the North Sea. A predictable licencing process with transparent checks will support the highly skilled people working in the sector, while ensuring the granting of new licences is compatible with energy security and net zero.

“We all recognise that our energy system must change, and the offshore energy sector is committed to delivering on the climate goals of the UK. While we continue to use oil and gas, we should prioritise our homegrown production to support our energy security, our economy, our jobs, and our world class supply chain that will be the foundation of our low carbon future.”

The proposed annual licensing rounds will only take place if two key tests are met that support the transition to net zero. The first test is that the UK must be projected to import more oil and gas from other countries than it produces at home and the second is that the carbon emissions associated with the production of UK gas are lower than the equivalent emissions from imported liquefied natural gas.  

Oil and gas producers contribute £16 billion every year to the UK economy and it is vital they are given certainty to develop a clear strategy to protect energy supplies at a time of uncertainty over our access to foreign imports. This follows embargoes on Russian energy since Putin’s invasion of Ukraine and the consequences of war in the Middle East.

OEUK estimates that around 200,000 jobs depend on the continuity of North Sea energy companies. The workforce has developed world-leading specialist skills since oil and gas production from the UK Continental Shelf began in the 1970s.About 90% of these workers have skills that can be readily transferred to renewable wind and hydrogen energy production or the growing carbon capture, utilisation and storage sectors.

Why does the UK need more oil and gas licences? 

  • Data from NSTA shows the UK only replaced 3% of production with new reserves in 2022, meaning that only 1 new barrel was invested in for every 33 existing barrels produced today (source: NSTA Oil and Gas resources report
  • The UK is expected to close production from 20 fields this year, whilst only two will start producing. 
  • For every one oil and gas well drilled, around three are closed.

Will the oil and gas produced in the UK be used in the UK? 

  • Around 75 per cent of the UK’s total energy comes from oil and gas. 
  • 44 per cent of UK gas comes from the North Sea, whilst produced oil plays an important role in meeting UK, as well as European energy security, where over 70 per cent of the UK’s oil is used (source: OEUK Economic Report 2023)

Will new oil and gas production in UK waters prevent the UK from reaching net zero by 2050? 

  • Analysis from the NSTA in July showed that the carbon footprint of domestic gas production is around one-quarter of the carbon footprint of imported liquified natural gas. 
  • As the UK is a rapidly declining producer of oil and gas, new oil and gas licences reduce the rate of declining UK supplies, rather than increase it above current levels – so that the UK remains on track to meet net zero by 2050.

Does each licence represent a new oil field? 

  • No. Each licence does not represent a new oil field. 
  • Companies require licences for a range of activity in so-called “blocks” – carefully mapped sections of the seabed in UK waters – starting from seismic and initial exploratory work through to production, either near existing infrastructure in previously known fields or in new fields. 
  • Licencing is a normal part of most energy production regimes and is used in the UK to manage the development of oil and gas, wind and most recently, carbon capture projects. 
  • It is part of a bigger process which companies must undertake to explore, analyse, produce and then eventually decommission energy production. 
  • There is a constant churn in domestic production, meaning as reserves are depleted, licenced production is decommissioned and new licences are required to simply maintain the rate of decline. 
  • The UK’s oil and gas regime is heavily regulated, with applicants for licences subject to strict commercial, environmental and health and safety conditions.
  •  Fast facts
  • Over 75% Proportion of UK’s total energy derived from oil and gas  
  • Around 220,000 Number of jobs supported by the offshore industry  
  •  Almost £30 billion Value of the UK oil and gas industry to the UK economy  
  • £11bn Estimated oil and gas production taxes paid to the UK exchequer in 2022/23 
  • Around 77bn cubic metres (bcm) UK’s annual gas consumption. Consumption so far in 2023 is 9% lower  
  • 1,150 cubic metres Average UK gas consumption per person  
  • 34 bcm UK gas production in 2022. Production so far in 2023 is 6% lower 
  • 44% Proportion of UK gas that came from the North Sea 
  • 61 million (m) tonnes UK oil consumption in 2022. Consumption so far in 2023 is 4% higher 
  • 0.9 tonnes Average UK oil consumption per person  
  • 41m tonnes UK oil production. Production so far in 2023 is 12% lower 
  • 67%: UK oil production equated to around two-thirds of consumption  
  • 13.8 GW Total UK offshore wind capacity – the second highest in the world. Supplying 15% of UK electricity 
  • 90 GW Overall UK offshore wind capacity potential 
  • 50 GW UK 2030 offshore wind capacity target. 
  • 20-30 million tonnes/year CO2 storage The government’s 2030 CCS target – with four cluster projects now supported 
  • 10 GW of low carbon hydrogen UK government 2030 low carbon hydrogen target 
  • Wells, in 2022 there were three times as many wells being decommissioned compared to production adding wells 

The latest stories