Overview

The Offshore Petroleum Licensing Bill amends the Petroleum Act 1998 to introduce new conditions for granting licenses to explore and extract offshore petroleum. These conditions are based on assessments of the carbon intensity of domestic natural gas compared to imports, and the UK's reliance on imported petroleum products.

Description

The bill inserts a new section (4ZA) into the Petroleum Act 1998, mandating the Oil and Gas Authority (OGA) to assess two tests annually, beginning October 2024:

• The Carbon Intensity Test (section 4ZB): This compares the carbon intensity of domestically produced natural gas to imported liquefied natural gas (LNG) over the preceding three years. Licenses are only offered if domestic gas has a lower carbon intensity.
• The Net Importer Test (section 4ZC): This evaluates whether the UK's domestic production of natural gas and crude oil is expected to be less than the demand for these resources for the next 15 years. Licenses are only issued if this condition is met.

If both tests are passed, the OGA must publish a notice inviting applications for offshore petroleum licenses. The Secretary of State can amend the definition of "carbon intensity" via statutory instrument, subject to parliamentary approval. The Act will apply across the UK and will come into force two months after it is passed.

Government Spending

The bill itself does not directly specify government spending figures. However, depending on the outcome of the carbon intensity and net importer tests, it could lead to either increased government revenue from licensing fees and taxes on domestic petroleum production, or conversely, reduced revenue if fewer licenses are granted.

Groups Affected

• Oil and Gas Companies: The bill will significantly impact these companies by introducing stricter conditions for obtaining licenses. This could reduce the number of new licenses issued, affecting their profitability and investment plans.
• Environmental Groups: These groups may view the bill favorably if it leads to a reduction in carbon emissions through promoting lower-carbon domestic gas production and reduced reliance on imports. However, concerns about continued fossil fuel extraction may remain.
• UK Consumers: The impact on consumers is uncertain. Reduced domestic production could increase reliance on imports, potentially affecting energy prices. Alternatively, increased domestic production might improve energy security and potentially reduce costs in the long run.
• OGA: The OGA will have new responsibilities in assessing the relevant tests and managing the licensing process.

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