32nd Offshore Licensing Round results and the future of licensing in the UKCS

On 3rd September 2020, the Oil and Gas Authority (OGA) announced the licence awards for the 32nd UK Offshore Licensing Round.

The OGA has awarded 113 licences to 65 companies. Meanwhile, on the same day the UK Government revealed that it would be reviewing its policy on the future UK offshore licensing regime as part of its wider aim of achieving net-zero emissions by 2050.

The announcement from the UK Government follows on from a statement made by the OGA back in March (and reiterated in their 3rd September statement), in which the OGA confirmed that it would be temporarily pausing licensing round activity, with no round taking place in 2020/21. The OGA stated that the pause is to “allow relinquishments to take place so more coherent areas may be reoffered in future, giving industry time to deliver on work commitments in the existing portfolio of licences”.

Future Offshore Licensing Regime

Industry experts have speculated that the review to be undertaken into the UK offshore licensing regime could result in emission reduction commitments forming part of the decision making process as to the award of future licences. This would be consistent with the increased focus towards the need for decarbonisation, as illustrated by the industry pledge to reduce emissions associated with offshore oil and gas production and the OGA’s recent proposed amendment to the “Central Obligation” in the MER UK Strategy.

Emissions reduction is now central to both Scottish and UK Government policy, with both Governments having passed legislation to achieve net-zero emissions by 2045 and 2050, respectively. In addition, Oil and Gas UK has pledged to reduce emissions associated with offshore oil and gas production by 50% by 2030, 90% by 2040 and becoming a net-zero basin by 2050. This makes the offshore oil and gas industry one of the first sectors in the UK to commit to industry-wide targets.

Continuing this trend towards a low carbon future, the OGA recently consulted industry on a proposed amendment to its MER UK Strategy, which would see the “Central Obligation” include a requirement for “relevant persons” (i.e. licensees and operators of offshore infrastructure) to assist the Secretary of State in achieving its net-zero emissions reduction target.

Balancing Net-Zero and MER UK

The potential change to the UK offshore licensing regime continues the decarbonisation trend. It will be interesting to see how the regulator manages to strike a balance between, on the one hand, maximising economic recovery of the remaining reserves in the UKCS basin and, on the other hand, helping support our global climate change emissions reduction commitments.

If you require any support following the 32nd UK Offshore Licensing Round, please get in touch with our oil and gas experts.