Onshore licences

Production licences

Recent onshore licences have the Prefix PEDL but there are older licences which are still extant with a prefix of AL, CE, DL, EXL, ML or PL. Except in special circumstances, onshore production licences run for three successive periods or terms:

Initial term

Associated with an exploration work programme that the licensee will have agreed with the OGA during the competitive application process. The licence will expire at the end of its initial term unless the licensee has completed the work programme and surrendered a fixed amount of acreage (usually 50%).

While the initial term is associated with a work programme of exploration work that must be completed if the licence is to continue into a second term, the licensee has the right to start production during the initial term, if the licensee can move quickly enough, subject to normal regulatory controls.

Second term

The second term is associated with appraisal and development. There is no agreed work programme; instead the licence will expire at the end of its second term unless the OGA has approved a development plan.

Third term

The third term is intended for production. The OGA has the discretion to extend the term if production is continuing, but reserves the right to reconsider the provisions of the licence before doing so, especially the acreage and rentals.

Each licence carries an annual charge, called a rental. Rentals are due each year on the licence anniversary. Rentals are charged at an escalating rate on 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.

While the initial term is associated with a work programme of exploration work that must be completed if the licence is to continue into a second term, the licensee has the right to start production during the initial term, if the licensee can move quickly enough, subject to normal regulatory controls.

Petroleum Exploration and Development Licence

An onshore production licence is known formally as a Petroleum Exploration and Production Licence (PEDL).

Petroleum Exploration and Development Licence

Initial term Five years
Second term Five years
Third term 20 years
Mandatory reliquishment at end of initial term 50%

 
Exploration licences

A company that wants to explore and does not need exclusive rights to drill or produce can apply for an onshore exploration licence. Exploration licences are useful for seismic contractors who wish to gather data to sell rather than to exploit geological resources themselves, and to holders of production licences who wish to explore outside the areas where they hold or require exclusive rights.

An exploration licence grants rights to explore only, not to produce; and is non-exclusive, covering all acreage outside those areas covered by any of the corresponding production licences that are in force at the time.

The annual payment on an exploration licence is lower than on the corresponding production licences. If the holder of an exploration licence wishes to explore acreage covered by a production licence, permission if required from the holder of that production licence.

The flat rate rental of an exploration licence is £2,000 per year and covers non-intrusive exploration whether carried out for the sake of hydrocarbon production, gas storage, carbon capture and sequestration, or any combination of them.

Exploration Licence application form (MS Word Document, 5KB)

Consent for flaring and venting

Under the Energy Act 1976, as amended by the Gas Act 1986, the Secretary of State’s consent is required for the disposal of natural gas (whether at source or elsewhere) by flaring or unignited release into the atmosphere. There are a number of exemptions, including flaring covered by one type of licence and gas supplied by a public gas supplier.

Contact Claire Grant on 0300 020 1014 or email claire.grant@ogauthority.co.uk for further details.

Methane from coalmines

Where the operator/owner of a coalmine has to capture natural gas in order to make the mine safe, it requires a Methane Drainage Licence (MDL) from the OGA pursuant to the Petroleum Act 1998. Safety is a high priority for the OGA and we will consult the Coal Authority about each case; principally to seek its advice about the safety issues that a particular case raises and to ensure that the operations are consistent with the Coal Authority’s own regulation of the mine.

Flaring or venting of the gas requires the OGA’s consent under section 12 of the Energy Act 1976, as amended by the Gas Act 1986 and Gas Act 1995. However, there are several exemptions to this requirement, including one that provides that flaring is permitted under the provisions of a production licence, if such a licence is in place.

 

  • Underground coal gasification

    Underground coal gasification (UCG) is regulated by the Coal Authority and does not require a Petroleum Act licence from OGA.

  • Older types of onshore licence

    Until 1996, the UK Government issued a sequence of separate licences for each stage of an onshore field’s life – exploration, appraisal, development and production.

    PEDLs were introduced in the Eighth Licensing Round in 1996 to reduce the bureaucratic burden of issuing a series of licences. The OGA no longer issues any licences of these types but a number of them, and older licences, are still in force.

    The Petroleum (Production) (Landward Areas) Regulations 1984 replaced an even earlier system of two types of Exploration Licences (XL) and Production Licences (PL) with a system of three types: a new type of Exploration Licence (EXL), Appraisal Licences (AL) and Development Licences (DL).

    The Department of Energy issued EXLs from the First Onshore Licensing Round (1986) until the Sixth (1992). Each Exploration Licence (EXL) ran for six years and carried an agreed work programme.

    The Five-year Appraisal Licence gave the licensee time to prepare a development programme and gain long-term planning permission. Only if both of those were in place would the department consider issuing a 20-year Development Licence. EXLs that have not expired or been relinquished have been converted to the same terms as a PEDL but their names have not changed, eg EXL141 or EXL169.

  • Mining Licences (ML)

    Dating from the 1950s, these are the oldest licences still in force.