New commitments to future licensing rounds will see hundreds of licenses awarded despite controversy over climate change consequences.
The UK government has announced around a hundred new licenses will be issued for oil and gas extraction from the UK’s seas. The announcement came against a backdrop of global energy security concerns since the Russian invasion of Ukraine.
The new licenses, the first of which will be issued later this year, continue a long-running process of the UK government spurring investment in North Sea oil and gas production, although the sector has shrunk significantly in recent times.
By 2022, output from the North Sea had fallen to less than a third of its peak around the turn of the century. The UK government is not planning to reverse that decline entirely, but it does hope that the new licenses will boost production in order to strengthen energy security.
Conflicting visions for the North Sea
While the North Sea has been a hub of oil and gas activity since the 1970s, the vision of its future has changed significantly now. Scotland, which had benefited from the economic impact of the oil and gas industry being centered around Aberdeen, had moved to a presumption of no new licenses by the start of 2023.
That change of stance at the time, reflected the huge success of recent offshore wind license auctions which had raised £700m in bids and seen around 25GW of offshore wind projects proposed.
Scotland has set a long-lasting path on offshore wind, becoming a global hub not only for capacity but for technology too. Scotland’s latest wind licenses included sites far further out to sea than previously possible, thanks to the development of floating wind farm technology in Scotland – which is home to the world’s first commercial floating wind farm already.
Oil, gas and net zero.
The UK government has argued that new oil and gas capacity can be made compatible with net zero deadlines already set in law (2050 for the UK as a whole, 2045 for Scotland in particular).
Rishi Sunak, the UK Prime Minister, explained that the under UK plans for net zero, around a quarter of energy will still be drawn from oil and gas by 2050. So alongside the license commitments, the UK government has announced two large carbon capture and storage projects.
However, for Scotland, where much of the UK oil and gas industry is based, moves are already underway to dramatically reduce gas and oil use over the coming years.
Humza Yousaf, the Scottish Prime Minister, responded that “the Scottish Government continues to believe in an accelerated Just Transition. Our future is not in unlimited extraction of oil and gas.”
Energy security
Nations around the world have been rocked by the energy crisis caused by Russia’s invasion of Ukraine. As one of the largest oil and gas producers in Europe, the UK was not a big user of Russian energy but saw its energy costs rise rapidly like other countries, as global oil and gas prices spiked.
Increasing output from North Sea oil and gas may not reduce the impact of volatile global prices on UK consumers, but it does represent a stable and secure supply of energy for the UK and for the countries it exports to.
Those exports may also grow faster because of high investment in renewable energy in the UK. The Crown Estate has an ambition to install 30GW of offshore wind by 2030 and has undertaken extensive efforts to simplify and speed up consenting so as to make the UK more attractive for investments.
That huge boost to renewable energy-use in the UK, backed up by huge new pump-storage capacity if projects go ahead in Scotland, could see the UK in a position to export significantly more of its oil and gas to its neighbours.
