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21 September 2020
On 3rd September, the Oil and Gas authority (OGA) announced its offer for the award of 113 licences over 259 blocks or part-blocks to 65 companies. Licences were awarded in the OGA's 32nd Offshore Licensing Round, which was launched on 11th July 2019 and closed for applications on 12th November 2019. The 32nd round saw the offer of 768 blocks or part-blocks, with acreage on offer in the Central North Sea, Northern North Sea, southern North Sea, and the West of Shetlands.
Those awarded licences in the OGA's 32nd round include Equinor, BP, Chrysaor, Summit Exploration and Royal Dutch Shell.
The round offered blocks in mature, producing areas, close to existing infrastructure, to be operated under the terms of the Innovate Licence. The terms of the Innovate licence provide applicants with the flexibility to define a licence duration and phasing that will facilitate the execution of 'the optimal work programme'. The majority of the licences awarded will enter an Initial Term, with 16 proceeding straight to Second Term either for potential developments or redevelopments of fields where production had been ceased, and acreage relinquished.
Upon its launch, significant volumes of 'ground-breaking' data, produced in collaboration with 11 companies including operators and third party specialists, were made available in support of the 32nd round. This was collated by the OGA in an attempt to assist the industry in their efforts to stimulate exploration and promote the creation of new opportunities within the mature areas of the United Kingdom Continental Shelf (UKCS). Aimed at demonstrating the OGA's 'continued commitment to supporting industry in its efforts to revitalise exploration', the release constituted the largest publicly available geometrical database for the UKCS.
Following the 32nd round, the OGA will not be running a licence round in what would have been the 2020/21 period, due to a temporary pause from annual licence round activity. According to the regulator, the aim of this hiatus is to allow time for relinquishments, and this enabling more coherent areas to be reoffered in the future, as well as giving the industry time to deliver on work commitments in the existing portfolio of licences. The industry has been encouraged by the OGA to use the pause to acquire data and carry out studies in preparation for the next round.
Government forecasts currently predict that oil and gas will remain an important part of our energy mix for the foreseeable future, as the industry moves towards its net zero target, as the UK is still expected to be a net importer. As such, the OGA has acknowledged the importance of managing the declining production and maximising the economic recovery, in order to meet these continuing energy demands and reduce reliance on hydrocarbon imports. The OGA is currently implementing a programme to integrate net zero considerations into its core business and this has included refreshing its Strategy. This new Strategy is expected to steward the licences awarded in the 32nd Offshore Licensing Round.
On the same day as the OGA's announcement of the 113 new awards, the government announced it is to review its policy on the future offshore oil and gas licensing regime, in line with the 2050 net zero target. The review will ensure the Government has the information required to plan for future UK oil and gas production, in a way that is aligned with tackling climate change. Initial findings and next steps will be published in the upcoming Energy White Paper.
The review is in keeping with the future direction of the Government's regulation of oil and gas in the UK, in that it will balance the importance of country's ongoing energy security and economy, against the need to ensure that much-needed supplies are maintained even as the UK cuts carbon emissions.
Alongside such, the upcoming North Sea Transition Deal will be published within this Parliament, later this year. The deal will set out more details of how Government plans to work with the sector and key stakeholders to achieve the aim of supporting a transition to low carbon energy sources, while getting the benefit from the limited reserves in the North Sea and protecting highly skilled jobs.
Information on the new licence awards can be accessed on the OGA website through the following links:
OGA Offer of awards maps by Area:
For further information on this topic please contact Norman Wisely, Graeme Clubley or Judith Aldersey-Williams at CMS Cameron McKenna Nabarro Olswang LLP by telephone (+44 1224 62 20 02) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The CMS Cameron McKenna Nabarro Olswang LLP website can be accessed at cms.law.
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