In an article published in the Telegraph over the weekend, it is claimed that UK ministers are mulling over options to end UK North Sea exploration through a ban on future licensing rounds. Although the details of the plans are not clear, the fact that this is now on the cards in Westminster is something with quite some potential implications.
Still a lot to go for
Rather than Denmark, where a ban on exploration was put into force at the end of last year, the UK North Sea does have a good number of prospects still to chase. It is true that exploration drilling fell off a cliff in response to the pandemic last year, but there are more than ten exploration wells on the agenda, with the Edinburgh prospect in the Central North Sea and Pensacola in the Southern North Sea just two high-profile examples. This clearly contrasts the situation in Denmark, where exploration drilling outside the known licences was already subdued for many years in the leadup to the ban.
Support for exploration in the Netherlands
In the Netherlands, the government recently even endorsed offshore gas exploration as well as committing to support production from small fields onshore, as there is increasing awareness that the decades leading towards a full energy transition will require support from hydrocarbons. It is with this in mind that offshore exploration drilling, with a more favourable tax regime now in place, will ramp up again slightly, as players such as Neptune Netherlands have also alluded to.
The timing of the announcement in the UK must probably be seen in the light of the upcoming COP26 Conference in Glasgow in November. This conference will be closely watched by a global community demanding concrete actions with regards to measures to mitigate climate change and the UK government no doubt feels the pressure even more as a host of the conference.
Ban on Coal Mines too?
In that light it is also interesting to see that London just last week announced a public enquiry into the plans for the construction of the first coal mine to be built in the UK in decades. Planned in Cumbria, where coking coals are to be mined from under the waters of the Irish Sea, the outpu would be primarily destined for the steel industry. Until last week Westminster claimed that the decision was above all a local political matter, but following criticism from a number of international names it was forced to reconsider and subject the process to a public enquiry first.
In a country where there is such drive towards being a net zero basin by 2050, plus the fact that oil and gas will be needed for a time to come and knowing that many existing fields are rapidly nearing the end of their lives, it is hoped that the government objectively balances the arguments and doesn’t decide too quickly in order to gain support at an event.