I was recently reminded of a new year’s resolution that I made some years ago – one which I’m successfully keeping to this day. Back then, I committed to making the transition towards a greener, more sustainable personal lifestyle. But here’s the clever bit: I figured it would also be OK to carry on pretty much as before with all my current behaviours. So, no really big changes required and certainly no tough decisions to make. Now, maybe it’s just me, but expecting the oil industry to get right behind the energy transition whilst sticking with MER does feel kind of similar.
MER was rolled out in 2015 but, in truth, it always had something of a seventies vibe about it with its focus purely on oil & gas and little reference to the environment. But here in 2020, can we keep pushing the extraction of every drop from the North Sea just as long as it makes a buck? Both the UK and Scottish governments have rolled out ambitious targets to go carbon-neutral. Public attitudes towards the environment are shifting. And, perhaps most significantly, technology is advancing rapidly: offshore renewable costs are tumbling and the take-up of electric vehicles may be closer than many of us imagine. Irrespective of what initiatives they commit to, what kind of reception can the industry expect at November’s COP26 in Glasgow if they remain wedded to MER? And, does MER prop up the Aberdeen economy or does it hold it back from embracing the far bigger prize of becoming a global energy transition hub?
Surely now has to be the time to re-focus North Sea oil & gas on a handful of key fields – and to reach out to the renewables sector to deliver vital energy transition solutions. If not now, when?
Total remaining North Sea reserves is significant. But as any explorer knows, much of these are dispersed across a vast number of technically-challenging ‘small pools’. Across Aberdeen, we continue to see smart people and valuable resources tied up in figuring out if these can be economically extracted. (Spoiler alert: they usually can’t). But even if they could, the contribution to national energy demand and to tax revenues would be minimal. And would they do for our climate goals and the energy transition? Far better to leave small pools in the ground and start channeling the same brainpower, finance and equipment into developing transition technologies such as electrification, CCUS and, most importantly (yet often ignored), hydrogen. These not only benefit the UK directly but create vast export opportunities.
Friends of the Earth have an interesting position. On one hand, they’re realistic enough not to demand the immediate closure of the entire North Sea. But their calls for the cancellation of tax incentives and the outright ban on all new licences risks a drastic short-term impact on the industry, not to mention Aberdeen’s economy. But, how about a variation: no future approvals for small fields of, say, sub-20 million boe reserves. And whilst the industry re-focuses itself, should it be subject to increased levies and more regulation? Why not support them with a ‘one in, one out’ approach: for every new transition initiative, let’s see something trimmed out of the OGA’s Asset Stewardship portfolio. Perhaps even roll out a leaner, fit-for-purpose regime for those low output, late-life assets.
For years, the North Sea was synonymous with oil & gas. Not anymore. Huge investment over the past decade has seen the UKCS become home to the world’s largest installed offshore windfarm capacity with more to follow as floating technology develops. Renewables operators are fast becoming the dominant force offshore. Of course, there are oil & gas operators who are already heavily invested in wind or in the hydrogen economy. But for the majority who aren’t, it’s asking a lot to develop a transition mindset and capability from scratch and at pace. So, instead of asking our industry to look within itself to find transition solutions, maybe we should be encouraging them to extend the spirit of collaboration across to the renewables sector. Wind operators generate power cheaply but often leave the grid hamstrung with their fluctuating output. If our sector can support with hydrogen production, storage and transportation, that’s a win-win outcome. Who knows, maybe we might even see cross-sector plans developing.
Sanjoy Sen CEng FIChemE is a chemical engineer with over 20 years’ industry experience. He also holds an MSc in Petroleum Engineering and attained a distinction in his LLM in Oil & Gas Law from the University of Aberdeen where he considered a devolved Scotland’s future. He spent four years in the Oil & Gas Authority as a Senior Development Engineer and ran as the Conservative candidate in Alyn & Deeside at the 2019 general election. He writes here in a personal capacity.