New report emphasises importance of maximising UKCS production during the energy transition

Drawing on latest research, Oil & Gas UK’s Energy Transition Outlook 2018 report looks at the key issues and opportunities for the offshore oil and gas sector in the rapidly changing energy landscape. 

The report highlights the industry’s key role in the energy transition and reinforces the industry body’s Vision 2035, ‘to add a generation of production to the UK North Sea and double the export opportunity for the supply chain worldwide … [which is] critical to deliver the balance between delivering our climate change targets and ensuring security of energy supply,’ says Oil & Gas UK Chief Executive Deirdre Michie.

The report shows that despite the rapid advances in low carbon technologies, there is ongoing demand in oil and gas in several key areas including transport and domestic heating. It makes the point that currently 80% of the UK’s 27mn homes are heated by gas, ‘demonstrating the long-term importance in ensuring security of energy supply’.

What’s more, a lower carbon future will still require large-scale energy distribution networks, undersea engineering and the mass movement and storage of gases and liquids. The report emphasises the important role that carbon capture, usage and storage (CCUS) and the development of hydrogen on an industrial scale will play in the future ‘as these will be essential elements of any lower carbon environment.’ And continues, ‘Clear evidence for this was in the action plan recently published by the Government to deliver the UK’s first CCUS projects by the mid-2020s.’

The report concludes by putting forward a ‘wider energy policy roadmap’ aimed at further intensifying the UK’s comparative advantage in offshore technology to deliver the next phase of the Energy Transition, focusing on the heat and transport sectors.

Furthermore, it notes that the maximum forecast impact of alternative technologies will only reduce UK oil and gas demand to around 100mn toe/y from the current level of 140-150mn toe/y. The report says: ‘This is significantly above the Vision 2035 target production level of around 60mn toe/y. In the longer term, the UK cannot decarbonise to the extent required without large-scale development of CCUS and increased use of hydrogen.’

As for emissions reduction objectives, the UK Climate Change Act set a legally binding 2050 target for emission reduction of 80% below 1990 baseline levels. However, other countries have gone further, like Sweden, which has committed to being carbon neutral by 2045. New intermediate objectives have also been set at European level following the 2016 Paris agreement. The EU has now adopted a 40% reduction target for greenhouse gas emissions by 2030 as well as a 27% target for renewable penetration and a 32% energy efficiency improvement. The report comments: ‘These objectives and the impact on the oil and gas sector depends on current and medium-term technological development.’