The licensing regime is designed to maximise the economic recovery of UK offshore oil and gas.
Types of Licences
- Seaward Production Licences have the prefix ‘P’ (e.g. P001);
- Seaward Exploration Licences have the prefix ‘E’ (e.g. E001);
- Landward Production Licence have the prefix ‘PEDL’, ‘EXL’, ‘PL’ or ‘ML’ depending on the vintage of the licence. (e.g. PEDL001, EXL001, PL001, ML001);
- Landward Exploration Licences have the prefix ‘LX’ (e.g. LX001);
- Carbon Capture and Storage Licences have the prefix ‘CS’ (e.g. CS001);
- Gas Storage Licences have the prefix ‘GS’ (e.g. GS001); and
- Methane Drainage Licences have the prefix ‘MDL’ (e.g. MDL001)
Except in special circumstances, production licences run for three successive periods or Terms. These Terms are commonly associated with a particular activity – the Initial Term with exploration, for example – but the rights conferred by the Licence do not vary between them, so a Licensee who moves fast enough and secures the necessary permissions and consents would not be prevented from starting production during the Initial Term. The duration of these Terms can be varied, in agreement with the NSTA.
The licence will expire at the end of its Initial Term unless the Licensee has completed an agreed Initial Term Work Programme and surrendered a fixed amount of acreage (usually 50%).
There is no Second Term Work Programme that is specific to a particular licence; instead the licence will expire at the end of its Second Term unless the NSTA has approved a development plan.
The Third Term is intended for production.
Offshore Innovate Licence
The Innovate Licence replaces several earlier types of Seaward Production Licence: the Traditional, Promote and Frontier types. The Innovate Licence offers greater flexibility in the durations of the Initial and Second Terms (which was the main difference between the older licence types). An applicant for an Innovate licence is able to propose the durations of the Initial and Second Terms, and among the permutations that may be proposed are those that represent those associated with each of the older licence types.
The Initial Term can now be subdivided into up to three phases, with the Work Programme being correspondingly divided:
- Phase A is a period for carrying out geotechnical studies and geophysical data reprocessing;
- Phase B is a period for undertaking seismic surveys and acquiring other geophysical data; and
- Phase C is for drilling.
Phases A and B are optional and depend on the applicant’s plans. Every Work Programme must have at least a Phase C (just as a drilling commitment was the minimum Work Programme before the Innovate concept).
It remains the case that a Licence may only continue from the Initial Term into the Second Term if (among other things) the Initial Term Work Programme has been completed and surrendered 50% of the initial acreage. Similarly, an Innovate Licence may only continue from one Phase into another if that part of the Term Work Programme associated with the earlier Phase has been completed and if the Licensee has committed to complete that part associated with the next. When continuing into Phase C, the licensee must also demonstrate the technical and financial capacity to carry out the Phase C part of the Work Programme.
In special cases where an applicant doesn’t propose any exploration at all and proposes to develop an existing field discovery or redevelop a field, a Licence may be awarded with no Initial Term; this is called a ‘Straight to Second Term’ Licence. Again, this was an option that was available before the Innovate concept.
In May 2022, the NSTA published 'Innovate Seaward Production Licences: Guidance on Phase Transition', which can be viewed here.
Landward Production Licences
Landward Production Licences follow the same pattern as their seaward version. They are known formally as Petroleum Exploration and Development Licences (‘PEDLs’). The corresponding Model Clauses are at The Petroleum Licensing (Exploration and Production) (Landward Areas) Regulations 2014. For more information on Types of Landward Licences please click here.
Exploration Licences are required when exploration is proposed out with an area that is licensed, whether that be a Production Licence (Seaward or Landward), and/or in the case of the offshore area a licence granted pursuant to the Energy Act 2008. Anyone who wishes to gather exploration data may apply for an Exploration Licence, without competition. An Exploration Licence only grants the right to explore and does not grant the right to produce. There are separate licences for the Seaward area and the Landward area.
For both a Seaward Exploration Licence and Landward Exploration Licence, there is a £2,250 fee per new application associated that must be paid before the licence can be granted. When making a payment to the NSTA for an Exploration Licence, the purpose of this payment should be noted on the payment reference.
Both the Seaward Exploration Licence and Landward Exploration Licence carry the requirement for an annual rental which is detailed in the licence. Invoices will be raised for the first year’s payment shortly after the licence has come into force.
Additionally, if the Seaward Exploration Licence is extant on the 1 April of any given year, it will be subject to the Industry Levy. Further guidance on the Industry Levy can be found here .
The application form for either a Seaward Exploration Licence or Landward Exploration Licence can be found here, details surrounding payment can also be found in the application form.
Applications should be submitted to firstname.lastname@example.org
For further information regarding Seaward Exploration Licences and Landward Exploration Licences, please see below:
Seaward Exploration Licence
The Seaward Exploration Licence grants non-exclusive rights to explore anywhere in the offshore area that is not covered by Seaward Production Licences or a licence issued pursuant to the Energy Act 2008. Should a holder of a Seward Exploration Licence wish to explore within an area that is covered by a Production Licence and/or a licence granted pursuant to the Energy Act 2008, they will be required to come to an agreement with the relevant licensee(s).
A Seaward Exploration Licence permits non-intrusive exploration (including core sampling to 350 metres), whether for the purpose of hydrocarbon production, gas storage, carbon capture and sequestration, or any combination of them.
In most cases, it will be necessary to obtain further consents to specific operations from the Department for Energy Security and Net Zero’s (“DESNZ”) Offshore Petroleum Regulator for Environment and Decommissioning (“OPRED”) and they can be contacted at email@example.com. It is however the responsibility of the licensee(s) to ascertain these and any other regulatory requirements.
If a licence is granted, it will be valid for a period of three years and is renewable for a further period of three years. The application form found here is to be used to apply for a renewal.
If a Seaward Exploration Licence is granted, there is a requirement pursuant to the Energy Act 2016 for the licensee to appoint an Information and Sample Coordinator (“ISC”). Guidance on ISCs can be found .
Prior to licence determination (whether that be on expiry of the initial 3-year term or where a renewal has taken place, at the expiry of that period or through the licensee(s) acting to determine the licence), an Information Samples Plan (“ISP”) must be submitted to and approved with the NSTA. Guidance on ISPs can be found here.
Landward Exploration Licence
The Landward Exploration Licence grants non-exclusive rights to explore anywhere in the English onshore area that is not covered by a Landward Production Licence. Should the holder of a Landward Exploration Licence wish to explore within an area in the English onshore area that is covered by a Landward Production Licence, they will be required to come to an agreement with the relevant licensee(s).
A Landward Exploration Licence permits non-intrusive exploration only and this does not include core sampling. If a licence is granted, it will be valid for a period of three years.
A Landward Exploration licensee will be required to comply with the relevant Local Authority planning controls and environmental legislation where applicable. It is the responsibility of the licensee(s) to ascertain these and any other regulatory requirements.
Charges, rentals and levy
Each Production licence carries an annual fee, commonly called a rental. Rentals are due each year on the licence anniversary and are charged at an escalating rate for each square kilometre the licence covers at that date. They are designed to encourage licensees to decide which acreage to retain and to surrender acreage they don’t want to exploit. They are not calculated by the day, so relinquishments between licence anniversaries do not lead to a refund.
Being a licensee may give rise to a number of different fees and charges to cover the NSTA’s costs in processing cases of different sorts – well consents, FDPs, licence assignments etc. There is guidance on this website in appropriate places, and the scale of charges is set out in secondary legislation (see legislation.gov.uk; at the time of writing the latest order is The Oil and Gas Authority (Levy and Fees) Regulations 2022.
Offshore Licensees (including those who hold exploration licences) are liable to pay the Industry Levy.
Invoices require payment to be made within 30 days. Invoices that remain unpaid after this period will incur an interest charge of 5% over the Bank of England base rate.
Licensees are expected to also pay any relevant fees or charges or petroleum rentals that arise within the year. The NSTA reserves the right to revoke licensees for non-payment of debts and will robustly pursue licensees for non-payment of any NSTA invoices.