OPINION: The British government’s “green industrial revolution”, unveiled last week, is a new wake-up call for the oil and gas industry.
There are plans to ban the sale of new petrol and diesel cars by 2030 and build the transport future around electric vehicles.
The UK government’s 10-point plan will see £12 billion ($16 billion) invested in tackling climate change by quadrupling offshore wind production.
It aims to turn the City of London from a fossil fuel centre into a global focal point for green finance.
Prime Minister Boris Johnson wants to advance zero-emission planes and ships while insulating homes and boosting nuclear power.
Pressure on oil sector
All of these changes will affect the oil and gas sector at a time of weak crude prices due to the Covid-19 pandemic, as operators face severe financial problems.
The UK North Sea oil industry has in 2020 seen the lowest level of drilling for half a century, according to lobby group Oil & Gas UK (OGUK).
The group suggests in its latest report that there could be no further UK North Sea exploration drilling this year.
Meanwhile BP — historically the flagship British oil company — has just confirmed it plans to sell its London headquarters to cut costs.
So is it the final curtain call for what historically has been one of the leading offshore zones and for the wider landside oil and gas sector?
Well, it is worth remembering that more than £10 billion is expected to have been ploughed into North Sea oil and gas during 2020.
And there is no plan to deliberately phase out offshore oil and gas production as some critics wanted.
Neither is there any word about a carbon tax, although some still believe this could yet be coming.
There are also significant opportunities for the gas industry in particular, with plans to get a much-talked-about hydrogen industry off the ground in the UK.
The government wants 5 gigawatts of hydrogen production by 2030 for heating homes.
Ministers also promise to establish a “world-leading industry in carbon capture and storage” backed by £1 billion of public cash.
Deirdre Michie, chief executive of OGUK, said she was “pleased” with the 10-point plan that should help British oil companies lead the way on tackling carbon emissions.
But there can be no mistaking that a country that pioneered oil and gas production at home — but also in Iran, Iraq and Nigeria during colonial times — is now in retreat from fossil fuels.
The UK committed to net zero carbon emissions by 2050 in its own Climate Change Act 2008 and is now trying to set a pathway to achieve that.
The local oil and gas industry needs to play its role in that, as Michie accepts, by harnessing its huge project-development expertise in a greener direction.
The UK North Sea as an oil and gas exploration basin can only ever recover with the help of higher oil prices plus government and public support.
Otherwise, the future for the UK offshore oil industry could be largely built around the decommissioning of platforms and pipelines.
The wider business community sees the UK green industrial revolution as a major step in the right direction, but some environmentalists dismiss it as “too little, too late”.
Oil and gas companies will surely see it as neither of those things, but just a signpost to a more precarious but inevitable future.
(This is an Upstream opinion article.)