Rethinking Priorities: The Contradictory Nature Of The North Sea Transition Authority’s Regulatory Role

April 25, 2024

The North Sea as seen from an aerial image.
Source: Getty Images Signature

Last year, Prime Minister Rishi Sunak announced that the UK government will be granting hundreds of new oil and gas licences in the North Sea. This decision was framed as a means to protect jobs, reduce emissions, and enhance UK energy independence and security. However, the move to expand oil and gas extraction contradicts the UK government’s commitment to achieving net zero emissions by 2050. The North Sea Transition Authority (‘NSTA’) (formerly the Oil and Gas Authority) is the agency responsible for granting new oil and gas licences. Alongside this, the NSTA also regulates and influences the oil and gas, offshore hydrogen, and carbon storage industries. It is involved in driving the North Sea energy transition, which sits in direct contradiction to their ability to grant new licences.

This blog delves into the core objectives of the NSTA, examines enforcement data, and explores the potential for reform.

The North Sea Transition Authority: Core Objectives

NSTA’s core objective is to achieve the maximum economic recovery (‘MER’) of UK petroleum, as set out in section 9a of the Petroleum Act 1998. This objective is to be met through the ‘development, construction, deployment and use of equipment used in the petroleum industry’, thereby encouraging the NSTA to support oil and gas extraction. However, this objective stands in direct conflict with the urgent need to mitigate climate change. The continued extraction and burning of fossil fuels, including oil from the North Sea, are significant contributors to greenhouse gas emissions, driving climate change and exacerbating its impacts. By prioritising MER, the NSTA risks perpetuating reliance on fossil fuels and delaying the UK’s transition to renewable energy alternatives. Similarly, within their strategy, the NSTA does not state any provisions or mandate to promote renewable energy.

In 2021, in line with section 9a(1) of the Petroleum Act, a revised energy strategy was produced by the Oil and Gas Authority supporting the net zero strategy, stating that oil and gas companies should ‘maintain good environmental, social and governance practices in their plans and daily operations’. However, even in the face of this revised strategy, the MER of UK petroleum remained a central objective. A year later, the Oil and Gas Authority’s name was changed to the NSTA, with ‘transition’ being carefully added. This change was explained as reflecting the expanding role of the NSTA in the future of energy in the UK. However, Caroline Lucas has criticised this change, stating “an oil and gas body removing the words ‘oil and gas’ from its own name is the very epitome of greenwashing”.

Therefore, after this revised strategy, the NSTA has a responsibility to align the industry with transition, emissions reduction, and decarbonisation, while having the authority to grant new licences for oil and gas exploration. This alignment poses a contradiction for the NSTA, meaning that it faces a critical dilemma between helping with the energy transition while also helping fossil fuel expansion. As was stated earlier, licensing for oil and gas has been ramped up in the last year and shows no signs of slowing down. However, in comparison, the enforcement record of the NSTA is much lower, with only seven cases since 2021 resulting in fines totalling £525,000. Of these seven cases, Shell and BP have both been fined £50,000 each for an oil drilling violation. Therefore, looking at these numbers, it can be seen where the priorities lie for the NSTA, and it is not with regulating the fossil fuel industry.

Reforming the Petroleum Act

While MER stands as the core objective of the NSTA, enforcement action against fossil fuel corporations will be low and granting new oil and gas licences will be the priority. Therefore, the Petroleum Act 1998 that sits at the heart of the NSTA needs reforming. This reform would provide an opportunity to completely rethink what we want the North Sea to be used for: exploitation of oil and gas reserves or the mobilisation of renewable energy technology. It has been suggested that there could be a reversal of ‘maximising’ to ‘minimising’ of economic recovery, or replacing ‘economic’ with environmental recovery. However, even this would still allow too much subjective interpretation.

Removing MER rather than reforming or changing its meaning may need to be considered. This would potentially open the door to the NSTA being able to place greater emphasis on environmental protections, enabling stricter regulations of fossil fuel corporations. Whatever form this may take, a radical reform of the Petroleum Act and therefore the core objectives of the NSTA is needed if the UK is going to fully align with their 2050 net zero target.