OIL giants have increased their exposure to the West of Shetland area which has generated excitement in the industry, as a wide range of firms underlined their confidence in the exploration potential of the wider North Sea.

The regulator announced it has offered licences to 65 companies in the latest round, which industry leaders said showed the North Sea remained attractive to a range of firms amid very tough times for the sector.

The slump in commodity prices triggered by the coronavirus crisis has prompted firms to slash investment in the North Sea.

Campaigners have called for oil and gas exploration to be halted amid concerns about the threat of climate change.

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The UK Government yesterday launched a review of the licensing regime which it said would ensure it has the information needed to plan for future oil and gas production in the UK, in a way that is aligned with tackling climate change.

Business secretary Alok Sharma made clear ministers think the UK will need oil and gas for years. The industry will have an important role to play in the transition to a low carbon economy.

BP and Total have both been awarded licences West of Shetland in the latest licensing round after investing heavily in the region in recent years.

The firms have helped fuel hopes that billions of barrels oil could lie in the relatively under-explored acreage off the islands.

READ MORE: BP expects production at giant Shetland oil field to last for decades

The results of the licensing round may help allay fears about the outlook for the North Sea triggered by the fallout from the coronavirus crisis.

Exploration activity fell to record lows in the North Sea amid the downturn that was caused by the sharp fall in oil prices from 2014 to 2016. This led to concern that billions of barrels oil could be left undeveloped.

The Oil and Gas Authority has made offers in respect of around 260 blocks covering huge swathes of the North Sea, stretching from north of Shetland to East Anglia.

It was encouraged by the response to the latest round, which focused mainly on what are regarded as mature areas of the North Sea. This attracted more interest than the preceding exercise, which was completed in 2018.

The latest round closed in November, when Brent crude was selling for more than $60 per barrel. With Brent trading at around $44/bbl yesterday there will be fears that some firms’ enthusiasm may have waned since they applied for licences.However, the OGA expects most licence offers to be accepted.

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Believers in the North Sea will take comfort from the fact that firms from around the world and across the size spectrum have been offered licences.

Oil & Gas UK said: “At a time when companies face huge pressures it is encouraging that our basin continues to demonstrate its attractiveness to a wide range of companies.”

Katy Heidenreich, supply chain and operations director at the trade body, added: “While we are cautiously optimistic that this will translate into investment, there can be no understating the severity of the latest downturn on our industry.

“This further underlines the need for governments, regulators and industry to keep working together to maintain the attractiveness of the basin.”

Royal Dutch Shell and Norway’s Equinor were offered licences East of Shetland. US heavyweight Apache and Italy’s ENI have also been offered acreage in the area.

A range of American firms have sold out of the North Sea in recent years. Some have shifted investment to the shale fields of America.

The Central North Sea area off Scotland’s east coast attracted interest from a large number of firms, ranging from big fish to relative minnows.

Awardees include some relatively small independents that have played a big part in helping to stimulate interest in areas that big players seemed to have cooled on.

READ MORE: North Sea minnow underlines potential of prospect that caught Shell's attention

These include Deltic Energy, which turned heads last year after persuading Shell to buy into acreage in the Southern North Sea containing two big prospects.

Deltic, which used to be called Cluff Natural Resources, noted yesterday that it expects to drill a well on one of the prospects with Shell next year.

It was offered licences covering 12 blocks in the latest round.

Independent Oil and Gas was offered licences covering four blocks, 13 months after winning backing from US billionaire Warren Buffett for a plan to bring a cluster of undeveloped finds into production.

The Department for Business, Energy and Industrial Strategy noted that the oil and gas sector supports 270,000 jobs across the UK and plays a key role in developing the infrastructure and capability for green technologies such as carbon capture and storage and hydrogen power.

The sector is also a major source of tax revenue.

Mr Sharma said: “While we have decarbonised our economy faster than any other major country over the past two decades, the oil and gas sector will continue to be needed for the foreseeable future as we move toward net zero carbon emissions by 2050.”