Analysts have warned the long-delayed results of the UK’s 33rd licensing round could see developers hand back the North sea licences awarded to them.
Last week saw the third and final set of awards being offered for the round, which closed to applications nearly 15 months ago.
Head of oil and gas at Gneiss Energy Paul Weidman said: “Given the prolonged time from application in January 2023 to award of this final tranche, coupled with the fiscal changes that have happened in the interim, the NSTA may unfortunately find that many of these licences are handed back at the end of term.
“Fiscal uncertainty is bad for business and what the industry requires is clear, long-term signals from what we all expect to be the next government.”
The 33rd UK Offshore Licensing Round officially opened on 7 October, 2022 and closed for applications for licences on 12 January 2023.
Awards have been parcelled out over three tranches, with announcements in October 2023 and January of this year, while many applicants for this latest set have had a substantial wait.
The North Sea Transition Authority (NSTA) offered 31 new exploration licences in the latest tranche – announced Friday – to 19 companies, spanning some 88 blocks and part-blocks in the Southern North Sea, Central North Sea and East Irish Sea.
The NSTA said the licences offered in the latest round are expected to add an estimated 600 million barrels of oil equivalent (mmboe) up to 2060, or 545mmboe by 2050.
It saw little attention from the larger and established oil and gas players. Shell was the only one of the supermajors to participate, partnering with Dutch firm ONE-Dyas.
“With only 50 companies receiving a licence (with 82 offers), numerous companies and applications were left out of the round, which will leave many disappointed,” Mr Weidman added of the overall 33rd licensing round.
“The introduction of the EPL and various deteriorating fiscal changes since previous rounds, and future changes currently proposed by Labour, no doubt contributed to this drop in interest.”
Muted response on North Sea licensing
While several developers have released statements showing that they were happy with their awards, some have already expressed a more reserved reaction.
Europa Oil & Gas reported that the NSTA contacted it as part of the licensing round proposing the company partner with another party for the licence.
The company chose to both decline the offer, and said it would also decline if it were offered sole ownership of the area.
“Since making the application we have acquired an interest in the EG-08 licence in Equatorial Guinea, which we believe is very material,” Europa chief executive officer Will Holland said.
“Given the size of the company and our limited resources it is essential that we focus on where we see the best risk/reward proposition that can generate significant value for our shareholders.”
And Deltic Energy, which was provisionally awarded two licences over eight blocks and part blocks, said in an announcement that “in light of the current fiscal and political environment, Deltic will carefully consider whether accepting further licences in the UK is in the best interest of the business and its shareholders”.
Deltic CEO Graham Swindells, added: “We will now assess each of the provisional awards and carefully consider which, if any, of these awards the company will accept.”
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