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New Energy World
New Energy World embraces the whole energy industry as it connects and converges to address the decarbonisation challenge. It covers progress being made across the industry, from the dynamics under way to reduce emissions in oil and gas, through improvements to the efficiency of energy conversion and use, to cutting-edge initiatives in renewable and low carbon technologies.
The UK’s indigenous oil and gas resources should be seen as an enabler of the energy transition, writes Dr Slawomir Raszewski, Senior Lecturer, Royal Docks School of Business and Law, University of East London.
The issue of an affordable and sustainable supply of energy sources is back on the agenda as a key policy item and is likely to stay with us. The conflict in Ukraine and the subsequent cuts in natural gas supplies from Russia have further exacerbated energy security, affecting the markets only months after COVID-19 started to recede. Price volatility, politicisation of energy trade and geopolitics, as the ‘elephant in the room’, are all exerting unprecedented pressure on developed, yet import-dependent, economies.
It might feel as if we are back to the oil shocks of the 1970s, yet, despite the dire situation, some optimism should be retained. As the UK continues with its climate policy objectives, simultaneous domestic production, most notably by the North Sea offshore industry, is here to partially improve the UK’s energy security while assisting its energy transition trajectory.
UK oil and gas production in 2022 was enough to meet 56% of the UK’s needs (natural gas accounting for 38% of this, oil 75%). To boost domestic production, this autumn the government is expected to reveal its plans for dozens of new North Sea oil and gas licences to be launched, a move expected to be well-received by the industry.
At the time of an energy crisis there are no easy solutions. The government’s large, £130bn stimulus package to freeze energy bills, and avert a fully-fledged energy crisis for millions of households, will provide a helping hand to energy companies for the next 18 months or so. The urgency of the situation beyond this winter is clear in the way that the key institutions of the state are responding to it.
New licences and future production from the North Sea should be seen as complementary to the energy transition and likely to have an impact on future supply and prices. It is not a short-term fix to the problems in supply and pricing. Instead, it has the potential for hedging against an uncertain future on the markets in the coming years.
While we are yet to find out how long this crisis is likely to continue, bold and brave thinking about the country’s energy transition commitments and energy security is key. While the UK continues its path towards net zero, with the North Sea Transition Deal providing ample evidence of success in the production of offshore wind energy, the promise of energy security in the here and now is key for the functioning of the economy.
With the country’s proud legacy in North Sea oil and gas production, the policy promises a fine-tuning of the existing climate policy in these unpredictable and conflict-prone times.
Undoubtedly, the UK is on an energy transition path and the COP26 climate summit held in 2021 enhanced the policy approach of the government. Fast-forward to winter 2022, and harsh realities remind us of energy resilience. Energy demand reduction is the resource available now and is at our disposal. The North Sea Transition Deal is dependent on a sustainable supply of affordable energy as the UK is set to continue to rely on natural gas as a back up to intermittent renewable wind energy.
Equally, the offshore industry needs reassurance that the urgency to reduce the UK’s reliance on imported energy, and its vulnerability to global price shocks, comes hand in hand with a degree of investment stability. The UK’s energy reserves are equivalent to 15bn barrels of oil which, according to Offshore Energies UK, is enough to fuel the country for 30 years.
An absence of decisive policy response may be costly, as no new rapid investment in the upstream production of ‘conventionals’ may result in the UK having to import about 80% of its gas and 70% of its oil by 2030.
North Sea offshore production should be seen as an enabler of the energy transition, rather than an energy security game changer. It is vital that the UK economy continues to enjoy a sustainable supply of sources that are affordable.
The North Sea is not the solution, or an alternative to international oil markets. It should be seen as a policy response that helps secure supplies in the mid-term perspective of the next 10 years, when a transition is likely to accelerate. Increased domestic production is set to help provide a much-needed trigger for calming the economic storm which may engulf the world economy.
The views and opinions expressed in this article are strictly those of the author only and are not necessarily given or endorsed by or on behalf of the Energy Institute.