The offshore oil and gas sector is a major UK industrial success story. The United Kingdom Continental Shelf (UKCS) oil and gas supply has been at the heart of the UK’s energy and industrial strategy for more than fifty years, maintaining the country’s energy security, while keeping our homes warm, our country moving and creating hundreds of thousands of quality jobs.
With an international reputation for leading offshore exploration and production capabilities, a recent report from Oil and Gas UK revealed that projects in the region are expected to top £20 billion over the next five years.
However, climate change represents an existential threat to the planet, and experts agree that the UK’s offshore oil and gas sector holds a crucial role in tackling the emergency. One of the first major industries to publicly back the government’s net zero objectives through its Roadmap 2035, the sector is committed to delivering the skills, innovation and new infrastructure required to decarbonise North Sea oil and gas production and lead the way to a net zero future for all.
How to travel the road to net zero
The transition to net zero is complex and multi-faceted, and there are plenty of reports available which lay out what is needed for success. However, this level of detail and debate may lead to confusion, and for many operators, a lack of clarity on how to get started and where to focus is hampering progress.
It’s important to remember that good work is being done already and we believe this should give companies the confidence that they’re not starting from scratch in their sustainability endeavours.
Lots of operators are already reducing electrical load, for example. In addition, regulatory requirements on elements like methane gas emissions and flaring are largely being met already. Indeed, although it’s early days for the industry, many companies are starting to get ‘their house in order’, taking a holistic look at their assets, and making sure that they’re running as efficiently as possible.
Tackling the challenges
Despite all this good work, there are a number of challenges which need to be overcome in order to drive widespread and long-lasting change. The first is that much of the technology used in areas like carbon capture storage and hydrogen production is still relatively nascent. It’s difficult to invest in a large-scale decarbonisation project when the technology powering it is changing, and to be reliant on tech developments which aren’t yet mature. Tackling this challenge requires operators to be nimble and forward thinking – working to remain at the forefront of harnessing the newest tech innovation. Pilots are helping drive development, such as HyNet North West, which is set to provide a reliable supply of clean hydrogen to the industry.
And added to the tech challenge is a lack of clarity as to who is going to regulate the transition to net zero. Suggestions that Ofgem might oversee measuring and regulating the industry’s carbon reduction goals has caused mixed reactions – and for now, it remains a question to be answered, and yet another challenge to be tackled.
What does success look like?
Ultimately, we believe that success will be enjoyed by the operators who are not just working to meet regulations for today, but who are also committed to going further, and taking an active role in getting ready for the future. The savviest operators are those who get involved in pilots, commit both manpower and funding, harness technology developments wrapped in a pragmatic Environmental, Social and Governance (ESG) strategy and a realistic reporting matrix, with an eye on the Task Force on Climate-related Financial Disclosures (TCFD).
A big part of managing this change will be in tackling the well-publicised resource issue, building workers’ knowledge and skills to secure capacity for the future. Most of the majors, super majors and NOCs (National Oil Companies) are doing this well, investing in building dedicated renewables teams and transitioning its offshore engineers into floating winds and energy sectors, ensuring they have the skills and knowledge to do a different, but equally challenging, job.
Squaring the circle with a Maximising Economic Recovery (MER) strategy
Of course, decarbonisation isn’t the only challenge facing oil and gas operators today. Maximising Economic Recovery (MER) is a pressing policy objective, adopted in 2016 following the Wood Review, which was designed to reverse a decline in investment and production in the basin.
However, some say that efforts to promote new oil and gas production have, over time, increasingly come into tension with the need for rapid and deep decarbonisation – and that the objectives are fundamentally at odds. Indeed, the original MER UK strategy did not mention the energy transition or the need to reduce carbon emissions (although it does place an obligation on licensees to consider other options for the use of infrastructure, before proceeding with decommissioning, such as using it for carbon capture and storage).
The good news is that this is changing – and the Oil and Gas Authority (OGA), is reviewing and amending the MER UK strategy to make it consistent with the UK’s new statutory target of net zero carbon by 2050. Indeed, and for the industry to continue leading the world in oil and gas production, the tension between MER and decarbonisation must be resolved.
Andrew Glass is Oil and Gas Sector Transition Director at ITPEnergised. He supports upstream and downstream clients, from field development to decommissioning, enabling the Environmental & Social Governance agenda and the industry’s focus on decarbonisation through energy transition and enabling net zero.