King's Speech 2023 - Offshore Petroleum Licensing Bill

“Legislation will be introduced to strengthen the United Kingdom’s energy security and reduce reliance on volatile international energy markets and hostile foreign regimes.

This Bill will support the future licensing of new oil and gas fields, helping the country transition to net zero by 2050 without adding undue burdens on households.”

• ●  The Offshore Petroleum Licensing Bill will make the UK more energy independent by increasing investor and industry confidence with regular annual oil and gas licensing. The Bill’s emissions tests will ensure that future licensing supports the transition to net zero.

• ●  The Bill will enhance the UK’s energy security and reduce dependence on higher- emission imports from overseas, including from countries like Russia - protecting the domestic oil and gas industry that supports more than 200,000 jobs as we grow the UK economy and realise our net zero target in a pragmatic, proportionate and realistic way.

• ●  The UK has cut emissions further and faster than any other major economy and is proud to be a world leader in reducing emissions, but we can and must go further. This is why we have one of the world’s most ambitious 2030 emissions targets and why the Government is taking the necessary long-term decisions to put us firmly on track to deliver net zero in 2050.

• ●  The Offshore Petroleum Licensing Bill will safeguard our domestic energy supplies and increase certainty for the oil and gas industry by requiring the North Sea Transition Authority to run an annual process inviting applications for new production licences in the UK’s offshore waters, subject to key tests being met:

  o that the UK is projected to remain a net importer of both oil and gas; and

  o that the carbon emissions associated with the production of UK gas must be lower than the average of equivalent emissions from imported liquefied natural gas (LNG).

• ●  This Government recognises the critical role that oil and gas will play in our energy transition and will continue to support UK industry. Developments within the sector mean that production from new gas and oil fields can be much cleaner than producing hydrocarbons from older existing fields, reducing the emissions impact of future production.

  Territorial extent and application

● The Bill will extend and apply to the United Kingdom.

Key facts

• ●  The UK has cut emissions faster than any other significant economy:
  o basedonprovisionalestimates,theUKhascutitsgreenhousegasemissions

  by 48.7 per cent between 1990 and 2022;
  o generation from coal – one of the dirtiest of the fossil fuels – has reduced by

  95 per cent since 2010;
  o coal-fired power will be entirely phased out during 2024 – making the UK the

  first major economy to be powered without coal.

• ●  Production of oil and gas from the UK Continental Shelf is in decline and new oil and gas licences help safeguard our energy security and reduce our reliance on hostilestates. AstheUKisarapidlydecliningproducerofoilandgas,newoiland gas licences will slow the decline in UK supply rather than increase it above current levels.

• ●  In 2022, the North Sea Transition Authority launched the 33rd oil and gas licensing round. They recently announced the first 27 licences, with dozens of further licences from this round expected to be announced over the coming months.

• ●  Data published by the Climate Change Committee shows that the UK will continue to rely on oil and gas to help meet its energy needs even after the UK reaches net zero in 2050; this will include the use of gas for power generation with Carbon Capture Usage and Storage.

• ●  While the UK is a net importer, domestic production continues to be vital to our energy security. On average over the last 5 years, UK domestic production met 50 per cent of UK natural gas demand.

• ●  Even with continued licensing, production from the UK Continental Shelf is projected to decline at 7 per cent annually, this decline is faster than the average global decline needed to align with the Intergovernmental Panel on Climate Change’s 1.5-degrees pathways.

• ●  The carbon footprint of domestic gas production is around one-quarter of the carbon footprint of producing and importing liquefied natural gas. Not proceeding with new licences would mean increased reliance on this imported liquefied natural gas.

• ●  The UK’s oil and gas industry brings huge economic benefits to the UK. Domestic oil and gas production adds about £16 billion to the UK economy annually.

• ●  Domestically, the UK has some of the highest tax rates on fossil fuel producers, who have paid more than £33.7 billion in taxes since 2010 and are expected to pay around £50 billion in tax over the next five years. Not proceeding with new licences would mean reduced tax receipts.

• ●  The UK’s current dependence on fossil fuels is similar to other advanced economies. Japan gets 85 per cent of its energy from fossil fuels, the United States 81 per cent and Germany 76 per cent. The UK gets about 75 per cent.

• ●  The UK is committed to delivering on its climate goals and achieving net zero by 2050. And the Government’s record reflects this – we achieved the fastest rate of greenhouse gas emissions reductions of all G7 countries between 1990 and 2021 – and we are scaling up our renewable energy supplies, including wind, solar and nuclear. Renewables already generated a record 48.1 per cent of our electricity in the first quarter of this year.