The U.K.’s recently elected Labour party government, which had pledged to end all new North Sea oil and gas exploration licences were it to gain power, is coming to the realization that such a move may not be all that easy to execute in practice.
Furthermore, any move to do so suddenly may potentially end up costing taxpayers millions of dollars. That is because licensing is currently ongoing for which interested parties have worked on costly bids and are unlikely to give up without a legal tussle.
According to the North Sea Transition Authority (NSTA) – the industry regulator entrusted with managing the process – the latest licensing round was launched in the autumn of 2023 to carry out exploration work across 257 blocks [or drilling areas] of the U.K. sector of the North Sea, Irish Sea and East Atlantic.
According to public records, these involved 76 oil and gas companies submitting 115 bids. Bidding is a complicated often costing companies millions in legal, administrative, surveying and submission fees. Many energy companies sometimes opt to bid as a consortium compounding the financial exposure to multiple parties involved in the process.
But bids for 35 drilling areas were still awaiting a decision from the NSTA when former Prime Minister Rishi Sunak called a general election. Their cancellation by the current government – were it to do so – would almost certainly result in legal action by the companies involved.
On Thursday, a row broke out after a report in The Telegraph alleged that the Secretary of State for Energy Ed Miliband had issued an executive order for an immediate ban on all new oil and gas drilling in the UK continental shelf.
With the media subsequently jumping on the cost of legal fallout such a move may generate, the Department of Energy Security and Net Zero issued a rebuttal describing the story as a “complete fabrication.”
“As previously stated, we will not issue new licences to explore new fields. We will also not revoke existing oil and gas licences and will manage existing fields for the entirety of their lifespan,” it added.
The NSTA also noted in a letter to the publication: “Contrary to the article, the Secretary of State for Energy has not told us not to approve a round of new drilling. Indeed, no such proposal has been made.
“There remain a handful of applications still to be decided from the 33rd Oil and Gas Licensing Round. The NSTA is an independent regulator with robust well-established processes in place, and we will reach decisions on these in due course.”
Be that as it may, the problem – if the new government deems it as such – remains. Unsurprisingly, Labour party’s proposed ban on fresh oil and gas drilling in the North Sea remains deeply unpopular with energy industry groups as well as labour unions. Any sudden move will also trigger a row for a government in its infancy.
Therefore, it is quite likely that through gritted teeth Energy Secretary Miliband may end up allowing the last remaining bids to proceed before announcing his controversial ban on further drilling in the North Sea in line with his party’s manifesto commitments made prior to the election. Its either that or risking millions in legal action.
Read More: Cancellation Of U.K. North Sea Oil Drilling Bids May Cost Millions