The Covid-19 pandemic has had a vast impact on people’s lives, as well as on companies around the world.
These are challenging times for our industry – as they are for so many others – and Shell is no exception.
But the challenges the world faces today because of the pandemic have not changed the long-term challenge in front of it: climate change. The fundamentals of the energy transition to a lower-carbon future are still in place – and the world still needs to move fast to transform its energy system.
The UK set itself a legally binding commitment to achieve net-zero greenhouse gas emissions by 2050 and needs to move quickly to deliver this.
In setting that target the UK showed leadership and it is right that Energy Voice has dedicated this supplement to leadership. Because right now we need leaders – both in government and in industry. We need leadership so that our destination is clear and we need leadership so that there is action towards that destination.
Importantly, in the context of Covid-19, we need action that takes us towards a lower-carbon future at the same time as stimulating economic recovery.
Much of the answer will come down to energy: how it is produced and how it is used. But while energy is a big part of the solution, there is not, yet, enough understanding of the role the oil and gas industry can play in the green recovery. It is up to us, as leaders in the energy industry, to change that.
We have already made a start. The energy industry in the North Sea has shown leadership by setting ambitious targets to lower its own emissions. Our industry has committed to working with the government and regulators to achieve a 50% reduction in greenhouse gas emissions by 2030 and to be a net-zero basin by 2050.
But this can only be the start. Emissions from the production of oil and gas account for around 4% of the UK’s greenhouse gas emissions. So, while our industry’s action on greenhouse gases is a necessary and welcome first step, there is much more we can do in helping the UK meet its 2050 net-zero target. With strong leadership, there are many more opportunities we can take.
As just one example, we can help the emergence of carbon capture, use and storage (CCUS). This technology is vital to help decarbonise major parts of the economy. Some sectors, including steel and chemicals, need it because they have to use traditional fuels to generate the heat their processes require. Some sectors, including cement, produce carbon dioxide as a result of the chemical reactions involved.
By pushing the case for, and accelerating investment in, CCUS projects, we can help decarbonise existing industrial hubs, taking streams of greenhouse gas straight from industrial producers and storing them away or making use of them. This type of thinking, this type of action, can create new jobs, new businesses, new opportunities.
This technology can also be used to capture CO2 emissions associated with the production of hydrogen from natural gas, known as “blue hydrogen”.
Many believe that hydrogen can provide a significant part of the answer to the energy transition. Until there is enough renewable energy available to produce hydrogen by electrolysing water, “green hydrogen”, producing hydrogen from natural gas will be essential and can help to enable the widespread adoption of the fuel. Matched with CCUS it can be a low-carbon solution.
And I have not even touched on the many lower-carbon opportunities for our industry in electricity and offshore wind.
So, there is much leadership we can show, much action – and many opportunities – to take.
Leadership, from within our industry and from government, can nurture the innovative and creative thinking we need. We must, together, develop business models and regulatory frameworks that create confidence. And confidence is the best way to encourage private sector investment in emerging low-carbon solutions.
In its recent UKCS Energy Integration report, the UK Oil and Gas Authority said that integrating oil and gas, renewables, hydrogen and carbon capture and storage could make a major contribution to the UK’s target of net zero by 2050.
It said it could contribute up to 30% of the total carbon reduction the UK needs. The government, regulators and industry must deepen the successful ways of working we have established in recent years to achieve this.
The North Sea has a 50-year track record of innovation, skilled people and the determination required to deliver world-class energy projects. We have a track record of leadership. We have a track record of action. It is that track record which gives me confidence that our industry can play a significant role in the UK’s cleaner energy future – to develop the new skills, new expertise and new partnerships for the future.
A great opportunity is within our reach. An opportunity to contribute not just to economic recovery, but a green economic recovery. Yet we cannot expect it to be handed to us, we must take it.
It is up to us, as leaders in the energy industry, to do so. We must lead. We must act.