23rd Seaward Oil & Gas Licensing Round and offshore wind farms

On 10th March 2005, the Secretary of State for Trade & Industry invited applications for Licences in the 23rd Seaward Licensing Rounds, opening up the whole of the North Sea, with a record-breaking 1,329 blocks on offer.

However, for the first time, oil and gas companies may have to share the resources of the UK Continental Shelf with a relatively new entrant to the energy market; offshore wind farms. Although the first offshore wind farm was commissioned in December 2000, the first round of licences were something of a demonstration round. Wind farms were generally limited to 30 turbines of 2MW in an area of 10km2. They were all located in water depths of less than 20 metres and no further than 12 kilometres offshore.

All this is changing. The Government has increased its renewable energy targets to 20% of electricity generation by 2020 and the industry is lobbying for a further push to one quarter by 2025. Offshore wind power will make up a significant part of this increase. The latest generation of wind farms will cover far larger areas, with turbines each generating around 5MW of power. Based on a Strategic Environmental Assessment (SEA) that it commissioned, the DTI has created a coastal exclusion zone of between 8 and 13 kilometres from the shore. This will push the latest generation of wind farms out onto the UK Continental Shelf and into some areas subject to oil and gas licences, particularly around the Greater Wash and the North West (Liverpool Bay).

For a map of Round One & Round Two Offshore Wind farm Locations and areas under licence, please click here. This will open a PDF in a new window.

The Department of Trade and Industry (DTI) has anticipated the potential for co-existence of Oil & Gas licensees and wind farm operators, and has set out certain guidelines for applicants for Oil & Gas licences in blocks that are likely to include a wind farm lease.

Licence blocks offered in the 23rd Seaward Licensing Round that are likely to include a wind farm lease are as follows:

Sea 2 & 3 Area Blocks:

40/10

47/02, 47/07, 47/14, 47/15, 47/19, 47/20, 47/23, 47/24, 47/25

48/16, 48/21, 48/22, 48/23, 48/27

52/02, 52/14, 52/15, 52/30

56/05, 56/09, 56/10, 56/13, 56/14, 56/18, 56/19

57/06

Applicants for these blocks are encouraged to make early contact with the holders of the relevant wind farm lease to discuss their exploration or exploitation proposals. In considering the application, the Secretary of State will be able to take account of the level of co-operation between the applicant and wind farm owners, and whether a reasonable commercial solution has been proposed. Similar considerations are relevant in applications for wind farm licences, so that negotiated and agreed proposals are likely to be viewed more favourably in respect of applications for both oil and gas and wind farm licences.

If it proved necessary to make adjustments to a wind farm in order to access oil or gas reserves, this would normally be a matter for commercial negotiations between the companies involved. However, of potential concern to wind farm owners is a clause in their leases, which provides for their unilateral termination in the event that the Secretary of State gives notice that the site is required for works connected with the exploration for or exploitation of oil and gas.

The British Wind Energy Association is in discussions with the DTI aimed at providing some reassurance to its members that this power will be used sparingly or that some compensation may be payable. However, the leases themselves do not seem to provide much protection and the importance of establishing at the outset whether this is likely to interfere with wind farm developments is obvious.

On the other hand, the development of offshore wind farms could provide certain energy generators with the chance to exploit potential synergies, as in the case of the Ormonde Project. This development in the Irish Sea proposes, subject to consultation and Government approval, a co-development scheme whereby electricity would be generated offshore from known gas reserves and an adjacent 30-turbine wind farm. It would then be exported via cable to the National Grid.

Such developments seem likely to meet Government approval, because they could encourage co-operation between the wind and oil & gas industries and facilitate the efficient exploitation of the nation's energy resources.

For further information about the 23rd Seaward Licensing Round or licensing of offshore wind farms, please contact Judith Aldersey-Williams in Aberdeen [email protected] or Timothy Pitt in Edinburgh [email protected]