Bids have been received for more than 400 blocks from oil and gas companies looking to add to its U.K. North Sea portfolios, in what amounts to a strong ‘thumbs up’ from the international industry following the government’s efforts to improve the sector’s fiscal terms and stability.

A total of 224 applications were submitted to the U.K, government for consideration for offshore blocks in the 27th licensing round, launched in February. The applications cover 418 blocks, out of the 2,800 offered in the round.

The number of applications is the highest ever received for an offshore licensing round in the U.K. since the licensing process was launched in 1964, beating the previous high set in the 26th round held in 2010 (beating that total by 37).

The U.K.’s energy minister at the Department of Energy and Climate Change, Charles Hendry, said, “There remains an extraordinary level of interest in North Sea oil and gas and it is tremendous news for industry and for the U.K. economy. We have been working extremely hard with the oil and gas industry to ensure the U.K. remains an attractive place to invest."

The recent budget was an important step to create a fiscal environment for North Sea development to flourish, providing energy security and jobs.

The U.K.’s oil and gas sector still provides almost half of the country’s energy and is the largest single industrial U.K. investor. Directly and indirectly it supports around 450,000 jobs in the U.K.

The 27th round saw 192 applications for traditional licenses, 25 for promote licenses and seven for frontier licenses.

LICENSING BACKGROUND:

Traditional License:

In use since offshore licensing began in the U.K., most licenses issued so far have been traditional licenses.

• Initial term – 4 years
• Second term – 4 years
• Third term –18 years
• Mandatory relinquishment at end of initial term – 50%

Promote License:

A variant designed to allow small- and start-up companies a Production License first and to attract the necessary operating and financial capacity later. The difference is seen more in the application process than the license itself, except in that the annual rental rate on a Promote Licence is reduced by 90% for 2 years. The license requires financial, technical and environmental capacity to be in place, and a firm drilling (or agreed equivalent equally substantive activity) commitment to have been made by the end of the second year, or the license will expire at that time.

• Initial term – 4 years
• Second term – 4 years
• Third term – 18 years
• Mandatory relinquishment at end of initial term – 50%

Six-year Frontier License:

This is another variant. It has a six-year exploration phase and is designed to allow companies to evaluate large areas with greater materiality for a period, so they can look for a wider range of prospects.

• Initial term – six years
• Second term – six years
• Third term – 18 years
• Special mandatory relinquishment of 75% after three years with a mandatory relinquishment at the end of the initial term of 50% of the remainder (making seven eighths in total)

Nine-year Frontier License:

The most recent variant offered. It is designed for the harsh West of Scotland environment, and is similar to the existing Frontier License but with an initial term of nine years. DECC will only consider work programs of the drill-or-drop type with the decision to be made by the end of the sixth year and (if the licensee chooses to drill) drilling to be completed within the remaining three years of the initial term.

• Initial term – nine years
• Second term – six years
• Third term – 18 years
• Special mandatory relinquishment of 75% after six years with a mandatory relinquishment at the end of the initial term of 50% of the remainder, making seven eighths in total