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Offshore oil and gas sector sidesteps Net Zero challenge

General - Offshore Oil and Gas

The UK oil and gas sector, long berated for its huge contribution to carbon emissions and resistance to climate action, has launched a sectoral blueprint which it says can deliver the Government’s Net Zero target by 2050. But while it stresses incremental emission reductions, it has failed as yet to provide a convincing path to the deep decarbonisation needed.  

The Roadmap to 2035, released on 4 September by industry body Oil and Gas UK (OGUK), outlines how it sees the industry reaching Net Zero status by 2050 in the UK and by 2045 in Scotland through "government and regulator action to ensure the sector can continue to provide secure energy supply, support net-zero and remain a vital contributor to the UK economy".

The report followed extensive engagement with over 2,500 industry stakeholders, it stresses. But it remains to be seen whether it will result in decarbonisation or merely slow up the inevitable decline in a sector increasingly realising its vulnerability to transitional risks in a rapidly transforming energy market as renewable generation starts to undercut oil and gas.

OGUK says: "We now need a comprehensive UK energy strategy which recognises the continued role of oil and gas in a diverse energy mix and positions us to support net zero."

It adds: "Our Economic Report 2019 shows we are already playing an active role in the transition to a more diverse energy mix, with many of our members investing in renewables, developing new technologies and bringing new solutions to market."

The report points out the production of oil and gas accounts for 3% of total UK emissions, and the need to coordinate activities to cut these emissions. It also focuses on understanding how the industry "can play a key role in developing and commercialising low carbon technologies including Carbon Capture Usage and Storage and hydrogen".

It goes on to point out that "75% of the UK’s current energy needs are met from oil and gas, with just over half (59%) of oil and gas demand met by domestic production", highlighting findings of the advisory Committee on Climate Change "that the UK will still consume around 65m tonnes of oil equivalent /yr, (roughly 45% of current demand) in 2050, making carbon capture and development of hydrogen essential". But both viable CCUS technology and a hydrogen economy remain at an early stage, with CCUS a long way from commercialisation after the UK’s CCS £1bn commercialisation competition was cancelled in 2015.

It is as much a statement of where the industry would be headed in the absence of strong restrictions on emissions, buying time, rather than where it would need to be to ensure compliance with the Paris Agreement and the UK’s Net Zero target for 2050. For example, it notes that: "Drilling activity is increasing, that eight exploration wells and 10 appraisal wells commenced drilling in the first seven months of the year — more than those drilled during the whole of 2018". The industry "is also on track to drill more than 100 development wells for the first time since 2015".

The report highlights existing progress and further opportunities to cut the carbon footprint of oil and gas production, by focusing on indigenous rather than imported sources and other technical and supply chain efficiency improvements, reductions in flaring and carbon taxation. But many of these measures are to be delivered through business as usual, with incremental improvements, largely a restatement of the status quo combined with professed support for development of CCUS as a still unproven technical fix and incremental rather than exponential investment in renewables.

It does not address head on the much larger issue of unsustainable consumption, what the Bank of England has described as a carbon bubble that threatens the stability of the economy, and sidesteps setting any targets.

Instead, the report highlights the International Energy Agency (IEA) view that even in the most ambitious scenario "oil and gas would still be required to meet 48% of energy demand in 2040, compared with 54% at present". This view has been widely criticised as out of step with other assessments, and though it claims to have taken into account need to stay within 1.5°C-2°C warming it is hard to square with the need to leave substantial proportions of reserves in the ground to achieve this.  

It also largely ignores the need to decarbonise the transport sector, not least through electrification, but shares the view that investment in hydrogen and CCUS will be increasingly important in supporting decarbonisation of heating of buildings, together with electrification, and in carbon-intensive industrial processes. But while the OGUK report points to several CCUS projects around the world, it does not mention the lack of any such activity in the UK. Energy efficiency is also not highlighted, but could play a far greater role in cutting energy demand and emissions.   

The advisory Committee on Climate Change (CCC) 2019 Net Zero report makes clear that: "A net-zero GHG target is not credible unless policy is ramped up significantly. Most sectors will need to reduce emissions close to zero without offsetting; the target cannot be met by simply adding mass removal of CO2 onto existing plans for the 80% target." This means, it says, increasing low-carbon power generation from 50% to nearer 100% by 2050, with no unabated gas-fired generation beyond the 2020s, tackling lack of progress on emissions reduction in the recalcitrant transport sector, phasing out gas-fired heating of homes and businesses as well as decarbonisation of carbon-intensive industrial processes. While there will be some role for oil and gas, the conclusion that most reserves will need to stay in the ground, leading to risk of stranded assets in the absence of greater diversification into clean energy, is inescapable.  

But one area most would agree on is OGUK’s focus on the high degree of technical skill and adaptability within the oil and gas sector, a vital resource and source of employment that could increasingly be redirected towards more sustainable investments in activity such as offshore wind, with increasing crossover already occurring in many North Sea ports. This is where the UK’s Industrial Strategy and Clean Growth Strategy could, together with the industry’s efforts, help provide the framework for orderly transition.

Commenting on the oil and gas sector’s report, OGUK Chief Executive Deirdre Michie said: "Roadmap 2035 shows an industry in action with a credible plan for the future. While we don’t have all the answers to the big challenges we face, we have started work on what we know can be done. We are ready to work with others in developing some of the new solutions the UK needs, and the Net Zero Solutions Centre is a great example of this."

Business, Energy and Clean Growth Minister Kwasi Kwarteng added: "Roadmap 2035 shows how seriously the UK’s oil and gas sector is taking its mission to decarbonise and support the transition to net zero emissions by 2050… The highly skilled offshore energy sector will be integral to the UK’s energy transition, developing solutions to further bolster the sector’s significant contribution to our economy."

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