Government seeks input on the future of the North Sea and its role in the clean energy transition

Introduction

The government has recently launched a consultation “Building the North Sea’s Energy Future” aimed at placing the North Sea (its communities, workers, businesses and supply chains) at the heart of Britain’s clean energy future. Its goal is to drive economic growth and ensure prosperous and sustainable transition from oil and gas. The government wants to drive the development of an internationally-leading offshore renewable energy industry, which ensures good, long-term jobs, growth and investment in communities across the North Sea – boosting the country’s economy and energy security. The government is also trying to ensure oil and gas workers within the UK supply chain can take advantage of opportunities within the clean energy transition to create prosperity, jobs, growth, foster communities and build energy security. This strategy is linked to the objective of reducing carbon emissions from the use of oil and gas to try to align with the Paris agreement commitment to limit global warming to as close to 1.5°C from compared to 1990 levels and the UK’s legally binding target of reaching net zero by 2050.

What are the issues?

Although the government acknowledges that domestic oil and gas production has played an essential role in the UK’s energy system over previous decades, the Clean Power 2030 Action Plan, released in December 2024 outlines a pathway to meet a target of 95% decarbonisation of the electric grid by 2030, where unabated gas will provide less than 5% of generation. The stark decline in production is borne out by figures in the Digest of UK Energy Statistics which showed a 72% reduction in production occurring between 1999 and 2023. Production has decreased for several reasons, including a decrease in demand, a drop in oil prices, depletion of more accessible resources, and quickly increasing competitiveness of generating electricity from renewable sources. In addition, in March 2025, the government moved to ban new licences for oil and gas.

The government is concerned that the decrease in production will also lead to further decreases in jobs in the sector. In particular they have highlighted a study by the Robert Gordon University (RGU), which showed that the direct and indirect oil and gas workforce was forecast to decline from 120,000 in 2023 to between 60,000-87,000 in 2030.

At the same time, RGU estimated the offshore renewables workforce, which includes offshore wind, carbon capture storage (CCS), and hydrogen, could increase to between 70,000 and 138,000 in 2030 (subject to realised deployment across those technologies and the proportion of UK content delivered by the domestic supply chain). This is in part due to the projects the government’s clean energy initiatives is supporting that we reported on previously, Significant milestone for UK carbon capture projects as first contracts are signed | Hill Dickinson. Transitioning workers from oil and gas to clean energy could be key to maintaining economic conditions in areas heavily dependant on the oil and gas sector. Fortunately, the RGU’s 2021-24 review showed that over 90% of the UK’s oil and gas workforce have medium to high skills transferability and are well positioned to work in adjacent energy sectors, reiterating the significant opportunity to deliver a managed transition for the sector’s workforce. So, this transition does not seem out of the question.

The government argues that the current UK oil and gas reserves are insufficient to satisfy domestic demand something that is borne out by the fact that 80-90% of UK oil refinery input is already being imported, and domestic gas production only making up 44% of all gross supply into the UK (not considering exports) in 2023. This is used as part of the justification for the move towards cleaner energy sources.

How does the government propose to tackle issues related to the North Sea’s Energy transition?

This consultation continues including hydrogen and carbon capture storage in the North East of England. The consultation offers long-term certainty for the oil and gas industry, for example by consulting on a new regime to boost investment in jobs and growth. The consultation also commits to maintain existing oil and gas fields for their lifetime and work with businesses and communities on a managed transition, while implementing the commitment not to issue new licences to explore new fields.

In this article we discuss some of the government’s proposals with regards to the transition from oil and gas to clean energy by building on the resources already available in the North Sea region.

No new licences to explore new fields

In the past the North Sea Transition Authority (NSTA) and its predecessor carried out annual licencing rounds soliciting bids for new licences and a total of 33 offshore licence rounds were held between 1964 and 2024. The government notes that although there are currently 400 valid UK Production Licences fewer than 10% of recently issued licences have progressed to active production and therefore the government have concluded that future exploration and production licences would not meaningfully increase UK production levels. However, this 10% success rate is probably not that surprising given the low strike rate of offshore wells generally and difficultly the UK oil and gas exploration sector has had obtaining capital over recent years. Despite this, the government has confirmed that it will not issue new licences to explore new fields. The following definitions have been proposed for ‘new licences’ and ‘new fields’ however the government is requesting views from stakeholders on these definitions as part of its consultation. 

‘New Licence’ – this will encompass all future licence awards, issued via licensing rounds or out-of-round activities, that enable exploration and/or production activities to search and bore for and get petroleum resources. This would include the issuing of future: Seaward Exploration Licences and Seaward Production Licences (including Offshore Innovate Licences). It would not preclude the issuing of future: Carbon Storage Licences, Gas Storage Licences and Methan Drainage Licences.  

Crucially ‘licence extensions’ that extend the duration, term or phase applicable to previously awarded licences or licence equity of any kind between parties are not regarded as New Licences. The government has confirmed that these are important activities which facilitate the maintenance of existing fields and support the government’s commitments to not revoke existing licences, and to partner with businesses and workers to manage existing fields for the entirety of their lifespan.

‘New field’ – this will encompass all offshore ‘blocks’ or ‘part blocks’ (areas) where there is not currently a licence assigned to support the exploration and/or production of petroleum resources. This would include all currently unlicensed ‘blocks’ (areas) for which licences have previously been awarded to support petroleum exploration and/or production activities, or for which licences have never been offered. It would not include any UK Continental Shelf (UKCS) ‘blocks’ (areas) where there is a valid licence to search and bore for and get petroleum resources. Therefore, if a company has a licence over a block and wants to obtain a new licence over another block, perhaps because it discovers that the relevant reservoir extends into that block, then this will not be possible.  

These definitions will prevent new licence awards for offshore UKCS areas to search and bore for and get petroleum resources, while at the same time retaining licences to maintain production from existing developments and licenced projects.

The government also proposes to treat onshore licensing in the same way as offshore licensing and is therefore consulting on ending the issue of new onshore licences for exploration and production.  

North Sea Transition Authority

New proposals could also see changes to the role of the NSTA as the regulator of UK oil and gas, offshore hydrogen and carbon storage industries. Currently, the NSTA’s objective is to maximize the economic recovery of offshore oil and gas resources from the UKCS. The government believes this objective needs to be amended and is offering two options.  

The first option is to retain a single principal objective, with revised wording to reflect the updated stewardship role the government expects the NSTA to play in the transition to the basin’s clean energy future. The second option is to create multiple objectives either by instituting a revised principal objective with supporting sub-objectives setting out more specific detail, or by replacing the single principal objective with a set of primary objectives. For instance, the NSTA could be given the objectives of facilitating energy production and security, facilitating emissions reduction and facilitating a managed, orderly and prosperous transition for the UKCS. A similar approach has been taken with Ofgem and this second option seems to be the government’s favoured approach.

The government also wants to review the powers of the NSTA and consider granting it more powers in particular in relation decommissioning, disputes and sanctions and CCS, and hydrogen. Of particular interest to licence holders is a suggestion to grant the NSTA more powers in respect of plugging and abandonment (in particular in relation to the long-term suspension of wells), making licence relinquishment dependent on the completion of all required decommissioning works and streamlining and clarifying the statutory decommissioning process, clarifying how existing requirements apply to (for example) exploration wells and cessation of production.

In setting out its vision for the future of the North Sea, the government also considers in the consultation the opportunities available with regards to the existing workforce and supply chain which we discuss below.

Managed Transition for Workforce

The investment in clean energy is intended to support thousands of jobs. The government believes there is a huge opportunity for re-skilling and transferability of skills of the oil and gas workforce across the economy in particular in relation to expertise in geoscience, engineering, health, safety & environment. In these areas there are similarities for the requirement of CCUS, Hydrogen, Nuclear and Wind sector as well as Electricity Networks and Solar. The government has created the Office for Clean Energy Jobs which focuses on developing a skilled workforce in core energy and net zero sectors.

Oil and gas workers will also get help to move into these sectors, with a new energy ‘skills passport’ launched last month – led by Renewable UK and Offshore Energies UK and backed by UK and Scottish governments. This feature will support workers into careers in offshore wind initially, before being expanded to other renewable roles later this year. The skills passport will enable workers to more easily transition between carbon-intensive sectors to clean energy sectors.  

There is clearly plenty of scope and opportunity for existing workers in the oil and gas sector to transition to the clean energy sector. The government is already putting in place initiatives to enable this and must continue to do so while considering responses to the consultation in order take maximum advantage of the opportunity available and to overcome challenges that may arise.

Potential of the oil and gas supply chain to support clean energy sectors

There has been significant reduction in investment in oil and gas in recent years, partly due to the downturn in the global oil price. This has impacted the oil and gas supply chain significantly by decreasing turnover, leading to redundancies and business closures.  

The oil and gas supply chain has the potential for transformation away from upstream oil and gas to focus on the delivery of new energy transition projects. According to Rystad there is a high capability correlation between the UK oil and gas supply chain and the renewable energy sector. The supply chain targetable spend overlap is estimated to be 57% for floating offshore wind, 84% for carbon capture storage and 80% for hydrogen. The government also believes the expertise and breadth of capacity in the UK for decommissioning is well-placed to deliver future UK and overseas opportunities and to use its expertise to support the growth of decommissioning services in clean energy sectors such as offshore wind.

The government is seeking views on how it can support the supply chain to take advantage of the opportunities of the transition of the supply chain from oil and gas to renewable energies.

Managing existing fields for their lifespan

As the oil and gas production in the North Sea continues to decline the government wants views on how to manage the UKCS. In particular how the existing fields and their infrastructure can assist the opportunities for sectors to work together as the basin evolves over time. For example, synergies between offshore technologies could result in new types of strategic ‘hubs’, where oil and gas, hydrogen, CCUS and renewable technologies share infrastructure, or where assets are repurposed when they are no longer needed for oil and gas. Some ‘hubs’ could share decarbonisation technologies as a first phase, such as through partnerships between wind farms and oil and gas assets that enables electrification of oil and gas production. Over time these could develop into more integrated energy hubs that combine multiple technologies, such as through the incorporation of hydrogen or CCUS projects that use repurposed pipelines or depleted fields. This would significantly reduce emissions from continued oil and gas production, while supporting the scale up of clean technologies.

Conclusion

The consultation highlights the government’s desire for a managed transition from oil and gas to renewable energies. The government must collaborate with communities, workers and businesses in the North East in order develop a practical plan that is successful. Current plans for global production of oil and gas are not compatible with limiting global warning to 1.5°C. The government has set out its new targets to achieve clean power by 2030 and to reduce emissions by at least 81% by 2035 compared to 1990 levels. There is an excellent opportunity for the proposals in the North Sea region to play a significant part in meeting these targets however the government must ensure that it responds to the feedback it receives to the consultation and fully takes advantage of the opportunities available.

The consultation closes on 30 April 2025.