THE UK Government was urged last night to head off the threat posed by a Brussels bid for tougher restrictions on greenhouse gas emissions that could hit the offshore oil and gas industry hard.
West Aberdeenshire and Kincardine Liberal Democrat MP Sir Robert Smith said the new crackdown could add to rising costs, make it harder to attract investment in international markets at a time when the price of North Sea oil remained low and cause more job losses.
Industry body Oil and Gas UK warned that up to 1billion barrels of oil would remain under the sea because it would not prove economically viable to recover them.
Sir Robert has put down a question in the Commons calling for talks between ministers and representatives of the offshore industry to try to win an exemption from phase three of the new European Emissions Trading Scheme.
Without the exemption, operators would have to buy an allowance for emissions from electricity generation on offshore platforms for the first time.
Sir Robert raised the issue with Energy Minister Mike O’Brien last week, warning that the switch on newer platforms to all-electric operation – older platforms use more old-fashioned, mechanically driven machinery that does not result in carbon emissions – would be particularly damaging to North Sea operators. He said it would risk making the industry less attractive to investors compared with the Gulf of Mexico or other areas where oil is easier to extract.
The minister was said to have ignored the issue and Sir Robert put down another question to underline “serious concerns” among offshore operators.
Sir Robert warned: “This will not go away. There is a real risk of charges being imposed, which raises the prospect of significant financial damage which could result in less oil being extracted and more jobs being lost.
“The government must get together with the companies to see what can be done.”
Oil and Gas UK commercial issues manager David Odling said the crackdown “will increase costs significantly at a time when the industry is already struggling to attract the investment needed to maximise recovery of the UK’s hydrocarbon reserves”.
He said: “We fear its impact on the basin’s tightly balanced economics could mean that the recovery of up to 1billion barrels of oil and gas will no longer be viable and these will ultimately be left unrecovered in the ground.”
Mr Odling said the crackdown would not bring any environmental benefit overall because all the output from the North Sea was needed in the UK.
He said industry representatives had already raised the prospect with the government of seeking an exemption.
An Energy and Climate Change Department spokesman said it would “work closely with business to assess the case” to ensure British companies were not disadvantaged but would be “robust” in ensuring claims were genuine. He said he could not comment on individual cases.