The UK Government’s New Climate Compatibility Checkpoint for future O&G licensing in the UKCS
Updated: Oct 30
On 7th October 2022, the NSTA officially opened the 33rd UK Offshore Licensing Round, with blocks in the Central and Southern North Sea on offer. Four priority cluster areas in the Southern North Sea have been identified that are known to contain hydrocarbons and are close to infrastructure in the hope new production will start as quickly as possible .
The NSTA state the Licensing Round was aligned with the OGA Strategy (published in 2020), which:
‘requires industry to operate in a way consistent with net zero ambitions, lowering production emissions and making serious progress on the solutions that can contribute to the UK achieving net zero’,
and formulated in compliance with the Climate Compatibility Checkpoint (CCC) .
But what is the Climate Compatibility Checkpoint (CCC)? We've provided a short summary below.
In September 2022 the Department for Business, Energy & Industrial Strategy (BEIS) set forth its new Climate Compatibility Checkpoint with regards to future oil and gas licensing on the UK Continental Shelf (UKCS).
This is used to assess the climate compatibility of future licensing rounds and help to ensure that they
‘would not materially impact the ability of the UK to meet the international commitments it has made to combat global warming. These commitments include meeting Net Zero by 2050 in a way that is consistent with our carbon budgets and the Paris Agreement’ .
The checkpoint has been designed so that it is evidence-based, transparent and simple. This is achieved by creating a checkpoint that has a clear structure that is able to be described in a short document and that uses reliable data and projections that are publicly available and transparent .
There are three tests that must be passed for the checkpoint outcome to be positive and confirm that continued licensing would align with the UK’s climate objectives:
1. The first test will assess the sector’s progress towards the emissions targets outlined in the North Sea Transition Deal, taking into account both historical and projected data.
The goals set out in the NSTD are to ‘to reduce emissions from oil and gas production 10% by 2025, 25% by 2027 and 50% by 2030 (all relative to a 2018 baseline)’ . The oil and gas sector’s own commitments to reduce emissions 90% by 2040 and 100% by 2050 will be used post 2030 . It is assumed that there will be minimal new installations in the UKCS as a result of future licensing rounds with the majority of new fields assumed to be tie backs to existing infrastructure . Therefore the BEIS does not expect that future licensing rounds will contribute significantly to the total projected emissions expected from the UKCS .
2. The second test will compare the UK oil and gas sector against other major global producers using greenhouse gas emissions intensity.
As there is a difficulty in tracing the original source of oil outside of the UK and the final destination of oil exported from the UK, emissions intensities of UK produced oil will be compared to a global average. For gas, where tracing the origin and destination is significantly easier, UK gas emissions intensities will be compared to the countries the UK imports gas from.
3. The third test considers the UK’s status as a net importer of oil and gas and whether the UK’s energy demand is expected to drive the UK to continue to import oil and gas in the future.
This test will consider oil and gas separately and will consider projections over a 10-15 year period with the results focusing on the 5, 10 and 15 year intervals.
Calls have been made to apply these checkpoints more widely, so that licenses that have already been granted but where development have yet to begin also need to meet these requirements.
In a letter from the First Minister of Scotland Nicola Sturgeon to then Prime Minister Boris Johnson in August 2021, Sturgeon highlighted the fact that any licenses already allocated but yet to be developed would not be assessed by the proposed climate compatibility checkpoints and that this was a blind spot that needed to be remedied. She recommended these licenses should undergo a similar climate checkpoint before being allowed to be developed so that the UK’s emissions targets were not put in jeopardy . So far there has been no move to include existing licenses within the checkpoint systems.