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North Sea Transition Deal may allow new oil and gas exploration

Britain’s oil and gas sector is to be supported through the transition to a low carbon future under the government’s new North Sea Transition Deal agreed with the industry. 

The Deal concentrates on reducing carbon emissions from extracting oil and gas, rather than those associated with its end use. The government has not ruled out further exploration licenses for new oil and gas fields, though these will be checked for climate compatibility. 

Through the Deal, the oil and gas sector, which is largely based in Scotland and North East England, government and trade unions will work together to deliver the skills, innovation and new infrastructure required to decarbonise North Sea oil and gas production, says the Department for Business, Energy and Industrial Strategy (BEIS). The Deal will both support existing companies to decarbonise in preparation for a net zero future, and create a business environment to attract new industrial sectors to base themselves in the UK – thereby securing new jobs for the long-term.

Commitments in the North Sea Transition Deal include:

  • The sector setting early targets to reduce emissions by 10% by 2025 and by 25% by 2027, having already committed to cut emissions by 50% by 2030.
  • Joint government and oil and gas sector investment of up to £16bn by 2030 to reduce carbon emissions. This will include £3bn to replace fossil fuel-based power supplies on oil and gas platforms with renewable energy; up to £3bn on carbon capture usage and storage (CCUS); and up to £10bn for hydrogen production.
  • By 2030, the sector will commit to ensuring that 50% of its offshore decommissioning and new energy technology projects will be provided by local businesses.
Perhaps surprisingly, the Deal theoretically allows new exploration for oil and gas in the North Sea. But the government is to introduce a new ‘Climate Compatibility Checkpoint’ before any future oil and gas licensing round to ensure licences are aligned with ‘wider climate objectives.’ The Checkpoint will, says the government, assess domestic demand for oil and gas, the sector’s projected production levels, the increasing prevalence of clean energy technologies, and the sector’s progress against its emissions reduction targets.

If the evidence suggests that a future licensing round would undermine the UK’s climate goals or delivery of net zero, it will not go ahead. Yet the Checkpoint has yet to be designed – it will be implemented by the end of this year, adds BEIS.

The extraction of oil and gas on the UK Continental Shelf is directly responsible for around 3.5% of the UK’s greenhouse gas emissions, says BEIS. The government says that the Deal is expected to cut pollution significantly by 2030 while supporting up to 40,000 jobs across the supply chain.

In a further move, the government announced that it will no longer provide support for the fossil fuel energy sector overseas. This follows the Prime Minister’s commitment from December last year to end taxpayer support for fossil fuels projects overseas as soon as possible. The ban will include UK Export Finance and other support – with ‘very limited’ exceptions, says BEIS.

Business and Energy Secretary Kwasi Kwarteng emphasised the employment angle of the new deal: ‘We will not leave oil and gas workers behind in the UK’s irreversible shift away from fossil fuels. Through this landmark sector deal, we will harness the skills, capabilities and pent-up private investment potential of the oil and gas sector to power the green industrial revolution, turning its focus to the next-generation clean technologies the UK needs to support a green economy.’

Oil and Gas Authority (OGA) Chief Executive Dr Andy Samuel welcomed the North Sea Transition Deal: ‘the culmination of a considerable amount of work between government, industry and the OGA. It puts the onus on industry to go further and faster to support the UK’s net zero target. The Deal embodies the three main principles that we believe are vital to a successful energy transition.’ These are the importance of meeting energy needs cleanly; that the oil and gas industry is crucial to progressing alternative energies; and the need for an orderly transition for the 270,000 UK jobs involved.

But the possibility of continued oil and gas exploration caused much critical comment. Greenpeace summed this up, saying that the: ‘refusal to rule out new oil and gas licenses when the evidence is already clear that they are incompatible with UK climate commitments is a colossal failure in climate leadership in this year of COP26.’

Transformation of the offshore oil and gas sector will be no small task – the industry has strengthened the UK’s energy security, generated tax revenues and supported hundreds of thousands of jobs for decades, says the government. And oil and gas is still vital to the production of everyday essentials such as medicines, plastics and household appliances – this is likely to remain the case over the coming decades. 

News Item details

Journal title: Energy World

Countries: UK -

Organisation: Department for Business, Energy & Industrial Strategy

Subjects: Exploration - Oil and gas - Policy and Governance -

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