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New Energy World magazine logo
New Energy World magazine logo
ISSN 2753-7757 (Online)

UKCS on track to meet emissions targets but intensity needs to be addressed

8/6/2022

News

Shearwater gas field, North Sea Photo: Shell
The North Sea Transition Authority is currently aiming for a 50% reduction in absolute greenhouse gas emissions from the UKCS by 2030

Photo: Shell

The last few years have seen a reduction in total emissions from UK Continental Shelf (UKCS) upstream operations and improvement in emissions intensity as companies have focused their attention on operational advancements and efficiencies. But, with the low hanging fruit picked, there is a risk that this trend will reverse without capital investment, according to Westwood Global Energy Group.

Westwood tracks historical and future emissions and emissions intensity for every production hub in north-west Europe in order to better understand the impact each individual UKCS hub is having on regional performance.

 

The North Sea Transition Authority (NSTA) is currently aiming for a 50% reduction in absolute greenhouse gas (GHG) emissions from the UKCS by 2030. In the base case model, Westwood predicts that due to declining production and the number of hub closures, the offshore region is on course to meet these targets with total emissions reducing from 11.1mn tonnes CO2 in 2022 to 4.9mn CO2 in 2030.

 

However, while absolute CO2 emissions reduction might be on track, a review of the performance of the UKCS, measured as a CO2 emissions intensity (kg CO2/boe), indicates that the performance is set to decline. CO2 emissions intensity is expected to increase from an average of 20.9 kg CO2/boe in 2022 to 24.9 kg CO2/boe by 2030.

 

On a hub-by-hub basis, CO2 emissions intensity varies significantly, with some hubs more than five times the UK’s average. As the time-lapse suggests, typically it is the older platforms with low production rates that have higher CO2 intensity. For 2022, Westwood anticipates average CO2 emissions intensity for hubs less than 10 years old to be as low as 10.3 kg CO2/boe. If the 10 worst performing hubs in 2022 are excluded, this reduces total CO2 emissions by 17%, yet these hubs only account for 4% of UKCS production, it notes.


The cost of inaction 
Given the wide range of CO2 emissions intensity, benchmarking against UKCS averages will not be enough to drive emissions reduction initiatives in most cases, states Westwood. Instead, most operators in the region have set their own site-specific ambitions and targets. While this is undoubtably a positive development, these are internal KPIs (key performance indicators) and so operators are unlikely to be held accountable if targets are not met, it says.

 

There are financial motivations for improving the emissions performance of a facility. The European Union (EU) and UK Emission Trading Scheme (ETS) price has seen a three-fold increase in the last 18 months, so the cost of CO2 emissions is starting to impact the bottom line. Westwood forecasts UK hubs to pay $750mn in 2022 on ETS allowances. With free allowances declining in future years and the UK ETS price expected to increase further, the cost of poor emissions performance will become even more evident. At $100/t and excluding any free allowances, a hub with an emissions intensity of 50 kg CO2/boe will be paying $5/boe on emissions. Considering most CO2 emissions are a result of natural gas combustion, which could be a direct source of revenue, it becomes apparent why CO2 emissions intensity is such an important KPI.

 

In addition to CO2, methane is a key GHG in the offshore oil and gas industry, with a global warming potential 25–28 times higher than CO2. Analysis suggests similar trends to CO2 emissions intensity, with the older platforms typically having a higher methane intensity.

 

While the NSTA targets appear to be on track using the base case economic model, with energy security a major concern and uncertainty over future hydrocarbon prices, the industry may well see hub closure dates extended or new production being brought onstream, which in turn would increase absolute emissions for the region.