New investment in the energy transition can be a “crucial pathway” out of the latest downturn for North Sea firms, according to the head of the Oil and Gas Authority (OGA).
Andy Samuel, chief executive of the industry regulator, said, despite the global coronavirus pandemic and crash in oil prices, “there is arguably a greater need than ever” to “fast forward” the industry’s move to cleaner energy sources.
The comments come as North Sea operators have moved to reduce costs amid the oil price slump as the virus crippled demand globally.
Meanwhile, oilfield services companies, still under cost pressure from the last downturn in 2014, have been announcing hundreds of job cuts in recent weeks over the latest oil price crash.
Accountancy firm Deloitte said the downturn may be an opportunity to “reset” but the challenge will be in firms having cash to implement the necessary changes.
However, Mr Samuel said he is “encouraged” by recent conversations with operators and the supply chain.
He added: “They largely agree – and are keeping focus on the energy transition despite all the issues they are navigating.
“Net zero will be one of the key topics on the agenda of our annual meeting with managing directors later this month. We will share benchmarks, operators will discuss some of the impressive best practices they have developed and we will look at forward plans and targets.
“New energy transition investment opportunities can be a vital stimulus at this time – a crucial pathway out of the downturn, retaining skills, and creating a more sustainable and resilient energy industry.
“CCS (carbon capture and storage), hydrogen and subsea engineering, including repurposing and reusing valuable infrastructure are some of the key areas being progressed.”
The OGA is planning to publish Phase 2 of its Energy Integration report in June, looking at work towards net zero and the potential to use oil and gas infrastructure for cleaner forms of energy.
The North Sea industry was already planning to reach net zero by 2050 and, prior to the pandemic, had been promised a sector deal by the UK Government to protect jobs amid the transition.
Several industry leaders, including Mr Samuel, have made calls for any sector deal to include proposals from Sir Ian Wood for an Energy Transition Zone in Aberdeen.
A pair of renewable and low carbon energy groups have echoed Mr Samuel’s comments, stating the energy transition must remain a “top priority”.
Earlier this year, the OGA’s chairman Tim Eggar challenged the industry to have serious work underway on two major CCS projects by the time the COP26 climate summit arrived in Glasgow in November.
The event has now been postponed due to the virus outbreak, but Stuart Haszeldine, director of the Scottish CCS group and professor at Edinburgh University, said work must still go on.
He said: “The need for long duration planning does not disappear and the less that planning occurs, the more that huge cash injections are needed to mitigate the problem.
“It’s time to consider how to make future investments fulfil both the need of keeping industries serving society and the need to fulfil 2015 Paris Agreement requirements.
“Otherwise the hydrocarbon industry can ignore that North Sea oil production costs are some of the worlds highest, and tough it out with spectacular loss of revenue.”
Meanwhile Jean Morrison, chairwoman of the Aberdeen Renewable Energy Group (AREG), said they are having positive discussions with the industry.
She said: “In light of the current situation, the energy transition still needs to remain as one of the top priorities for us all as we look to the future.
“With decades of experience and knowledge, AREG members as well as the wider north east sector are not only well placed to deliver on energy transition but also attract investment and create jobs for the region.”