The UK Government today vowed to agree a North Sea transition deal with the oil and gas sector during the first half of 2021.
It provided the update in its long-awaited energy white paper, published today.
The government described the transition deal as a “quid pro quo partnership” between government and industry.
It will map out long term-action for transforming the sector and delivering the energy transition.
BEIS also said it would use the deal as a vehicle for creating new jobs as well as trade and investment opportunities.
UK oil industry chiefs submitted proposals for a “sector deal” to Westminster in March 2018, estimating total investment of £176 million could deliver £110bn for the UK economy by 2035.
Parts of the industry’s wish list were fulfilled, including the creation of a national decommissioning centre, but a sector deal in name was never granted.
The industry this year revised its proposals to better reflect the role it can play in the UK’s crusade to achieve net zero emissions by 2050.
In its white paper, the government said it had supported the oil and gas industry’s “bounceback” from Covid-19.
But it warned that a return to “business as usual” was “no longer an option”, in light of its legally binding net zero target and the pressure oil companies have come under to shrink their carbon footprints from both investors and environmental groups.
Westminster said its continued support for the oil and gas industry would be “in the context of delivering net zero”.
It will continue to push for a high level of ambition among oil and gas companies, which it said could go “further and faster” on the emissions front.
The white paper identified five “key deliverables” from the transition deal, including cleaner energy production through rigorous emissions cuts, supporting the delivery of carbon capture and storage projects and the development of hydrogen production.
Diversifying the supply chain into new energies and safeguarding existing jobs while creating tens of thousands of new ones were also among the objectives of the proposed transition deal.
The government said it would use the deal to help the oil and gas supply chain secure new low-carbon export opportunities overseas.
It will also seek an end to routine flaring before 2030 as part of its discussions on the transition deal.
Furthermore, it will “tackle regulatory and policy barriers” to the use of clean energy, such as offshore wind, to power offshore oil and gas platforms, replacing gas or diesel generators.
Separately, the government said it would review the remit and powers of its offshore environmental and decommissioning regulator, OPRED.
It said OPRED would increase its focus on the reduction of greenhouse gas emissions from offshore oil and gas operations and put in place a regulatory framework to support emerging decarbonisation technologies.
And the government said the Oil and Gas Authority’s decision to review its core strategy to include a requirement for the industry to bolster the UK’s net zero quest had the potential to make a “significant contribution”.
The UK offshore oil and gas industry has already committed to cutting its emissions in half by 2030 and by 90% within the following decade.
The sector has been crying out for support to help it overcome some of the strongest headwinds it has ever faced.
It has been struggling to cope with the Covid-19 pandemic, the oil price slump and the need to show it can play a positive role in the transition.
While few large supply chain companies have folded this year, thousands of people have lost their jobs.
OGUK chief executive Deirdre Michie said: “We welcome the publication of the energy white paper, in which the government recognises the positive contribution our industry can make in the transition to net-zero, both now and in the future. It sets out ambitious and challenging expectations of the UK offshore oil and gas industry, and we are committed to continue working collaboratively with governments and regulators as we deliver these.
“Today’s report not only highlights the critical role our industry plays in maintaining energy security in the UK, but also commits again to a transformational North Sea Transition Deal, which will be a key lever to moving the sector at pace towards a low-carbon future.
“It’s encouraging to see that today’s report also recognises the value of the UK oil and gas industry workforce, especially after such a challenging year. We know that if we are to unlock the challenge of net-zero, the talent, expertise and skills found within our workforce will be vital.
“As an industry, we remain committed to delivering our net-zero goals, as detailed in our Roadmap 2035. We will continue to work with the Government at pace to secure this vital sector deal in the first half of 2021, safeguarding jobs and supporting our energy communities in the journey to net-zero.”