Development pledges and new policing powers on CCUS, hydrogen and decommissioning have been unveiled in the UK Energy Security Bill, marking the “biggest reform” of its kind in a decade.
The UK Government has published the legislation, which follows the British Energy Security Strategy being brought out in April.
Regulator the North Sea Transition Authority (NSTA) has been handed new powers to police the sector on carbon, capture, utilisation and storage (CCUS).
Under the Bill, the NSTA is being handed discretion to “prevent undesirable changes of ownership and control of petroleum and carbon storage licensees before they happen”.
It comes after the NSTA announced its first ever carbon storage licensing round last month.
The move is designed to ensure licences and infrastructure “remain in the hands of companies with the best ability to operate it”.
The government is also granting powers to regulators to recover costs associated with regulating decommissioning in the industry.
State of the art business models
Meanwhile the government has set out its plans for accelerating CCS and hydrogen in the North Sea.
The government has pledged to introduce “state of the art business models , attracting private investment by providing long-term revenue certainty” for CCUS and hydrogen.
It will also establish economic regulation and licensing framework for “first-of-a-kind CO2 transport and storage networks”.
Professor John Underhill, director of the Energy Transition Institute at Aberdeen University, said the bill’s publication “acknowledges the crucial role that the energy sector plays in underpinning, powering and fuelling the UK” and a “new level of appreciation” for the combination of oil, gas, CCS, hydrogen and other renewables in the energy mix.
In particular he pointed to the measures for accelerating CCUS and hydrogen.
“Carbon storage is arguably akin to waste disposal, it does not have the same obvious finance basis and does not generate revenue in the way that oil, gas and wind power does.
“Consequently, it is good to see the Government’s commitment to provide long-term revenue certainty appetite to work with industry and academic partners to build business models and attracting private investment that’s needed.
“With a carbon storage round open, an offshore oil and gas license round due later this year and wind farm awards, there is significant competition for offshore real estate. It is good that the Government recognises the need to have a unified and consistent regulatory and licensing framework to enable the set-up and scale-up of renewable technologies so that we optimise the use of the subsurface and sea bed for the energy transition.”
‘Reindustrialise our economy’
Professor Underhill also said the NSTA stewardship of carbon licences “makes sense” to ensure these are “in the hands of competent operators”.
Other measures in the Bill include establishment of a new independent “Future System Operator” which will take a whole-system approach to UK energy, looking across gas, electricity and other emerging markets like CCUS and hydrogen.
An NSTA spokesperson said: “We welcome the Energy Security Bill and stronger NSTA powers before companies change hands. We also note the proposals on CCS and as the carbon storage licensing authority will continue to work closely with government and industry progressing this.”
Business and Energy Secretary Kwasi Kwarteng said: “This is the biggest reform of our energy system in a decade. We’re going to slash red tape, get investment into the UK, and grab as much global market share as possible in new technologies to make this plan a reality.
“The measures in the Energy Security Bill will allow us to stand on our own two feet again, reindustrialise our economy and protect the British people from eye-watering fossil fuel prices into the future.”
Judith Aldersey-Williams, partner at law firm CMS, said: ““The Energy Security Bill covers a very wide range of areas linked to government energy policy across many industries. It seems that many of these are intended to address issues that have been known about for some time but have become more significant in the context of the recent economic pressures on industry, the rising cost of energy and geo-political dynamics generally.
“NSTA has previously expressed concerns regarding the governance risks arising in the maturing UKCS basin with an increasingly diverse range of licensees. That led to the introduction of a governance obligation in the OGA Strategy when it came into effect earlier this year. Today’s announcement suggests that the NSTA considers that it needs additional powers to prevent investors entering the industry where they are not prepared to properly resource that involvement.
“The industry will be keen to understand the detail in connection with the announcement that the bill will enable the government to more fully recover the costs associated with regulating offshore oil and gas decommissioning activities, particularly whether there may be any unintended consequences on existing arrangements in place.
“The establishment of the economic regulation and licensing framework for CO2 transport and storage, and introduction of the business models for CCUS and hydrogen have been long awaited and are key requirements to ensure that projects can be meaningfully progressed.”