The UK oil and gas industry has hailed as “transformative” a new package of support agreed with government that is intended to set the stage for billions of pounds of investment to help operators cut carbon emissions and kick-start hydrogen and carbon capture projects.
Among the headline commitments in the long-awaited North Sea Transition Deal is a pledge by industry and government to invest jointly up to £16 billion ($22 billion) by 2030 to reduce emissions of climate harming carbon dioxide.
This includes up to £3 billion to replace fossil fuel-based power supplies on oil and gas platforms with lower carbon alternatives, up to £3 billion on carbon capture usage and storage and up to £10 billion to help hydrogen production.
The sector, meanwhile, has committed to new interim targets to reduce its operational carbon emissions — by 10% by 2025 and by 25% by 2027 ahead of a previously announced target of a 50% cut by 2030, which remains in place.
It has also voluntarily committed to ensuring that 50% of its offshore decommissioning and "new energy technology projects" will be provided by "local businesses".
Also announced at the same time, the government said it will introduce a new so-called “climate compatibility checkpoint” system before future oil and gas licensing rounds to ensure they are aligned with wider climate objectives.
This stops short of an outright ban on new licensing which, according to recent media reports, ministers had been considering ahead of the United Nations Cop26 international climate change conference in Glasgow in November.
The government also announced it will no longer provide support for the fossil fuel energy sector overseas from 31 March, following up on a pledge made by Prime Minister Boris Johnson in December.
The government claimed the measures will cut pollution by up to 60 million tonnes by 2030, including 15 million tonnes from oil and gas production while supporting up to 40,000 jobs across the supply chain.
UK Business & Energy Secretary Kwasi Kwarteng said: “When it comes to fighting climate change, we must all stand together. From the Shetland Isles to Orkney and Peterhead to Falkirk, the oil and gas industry is the economic artery for many communities in Scotland, and we are doing everything possible to ensure that this vitally important sector is not left behind as we transition to a green economy."
Chief Executive of Oil & Gas UK Deirdre Michie said: “The North Sea Transition Deal will unlock billions of pounds of investment and see government and industry work together to deliver a homegrown energy transition, realising innovative low carbon solutions that can be exported globally.”
Environmental groups and others, however, reacted less favourably to the deal and other announcements.
Greenpeace called the government’s refusal to rule out new oil and gas licences “a colossal failure in climate leadership”.
Mel Evans, head of Greenpeace UK’s oil campaign, said: “While the government has rightly recognised the need to set a global example in ending fossil fuel finance abroad, its domestic plans for oil and gas continue to fall woefully short, giving mixed messages on the world stage.
“Instead of finding ways to prop up this volatile and polluting sector, a better proposition for workers and communities would be for the government to confirm a ban on new licences, and put all its energies into a nationwide programme of retraining, reskilling and investment in renewables and green infrastructure.”
One senior executive with a North Sea-focussed operator, who asked not be named, told Upstream: “Despite the fanfare surrounding this deal, in reality we are yet to see any real detail about how it will support the industry in the near-term or help to incentivise investment in the longer-term.
“It does not seem to include the truly innovative thinking that had been promised over the last year. It feels somewhat of a missed opportunity.”
Extracting oil and gas on the UK continental shelf is directly responsible for around 3.5% of the UK’s greenhouse gas emissions.
In December, the government published its long-awaited Energy White Paper setting out legislative proposals for how the UK will deliver on its now legally binding targets to decarbonise its economy by 2050.