North Sea body urges Government to confirm green rules for new projects
One of the country’s leading energy bodies has called on the Government to publish its environmental requirements for new exploration projects in the North Sea as soon as possible.
It warned that with multiple sites reaching their shelf life, new developments were necessary for maintaining domestic production and the country’s energy independence.
This year’s licencing round for new exploration projects was expected earlier this summer, overseen by the North Sea Transition Authority (NSTA).
However, it has been delayed by Downing Street, which has refused to process fresh licences for exploration until it has confirmed its ‘Climate Compatibility Checkpoints’ for new projects.
Natalie Coupar, OEUK’s director of communications, told City PM: “Our concern is that new regulations tend to delay new projects. Right now the UK is facing a supply crisis and many of its older wells and fields are in decline. It’s critical for our energy security that we get the green light for projects that can maintain current levels of supply and minimise reliance on imports. We would urge the incoming government to publish these new regulations as soon as possible.”
The UK currently meets nearly half its energy needs through domestic oil and gas – reducing the country’s reliance on overseas vendors compared to its European allies.
The previous NSTA round – in 2019/20 – saw 113 licence areas offered to 65 companies.
OEUK remains in favour of environmental checks to ensure projects are sustainable and in line with domestic carbon budgets, which it has supported alongside net zero targets.
Nevertheless, it considers oil and gas production essential for a long-lasting transition to renewable energy.
When approached for comment, the Government confirmed climate checkpoints will be needed for all new licenses, which were designed in line with a public consultation that closed in February earlier this year.
It is still considering the responses to the consultation and has confirmed it will announce the outcome later this year.
A BEIS spokesperson said: “There will continue to be ongoing demand for oil and gas over the coming decades as we transition to cleaner energy, and we are backing North Sea oil and gas production to ensure greater security of supply during this transition. The climate compatibility checkpoint will not affect proposed developments that come under an existing license.”
OEUK: Still a big role for gas in energy transition
There is renewed focus on supply security following Russia’s invasion of Ukraine in February, with the Government keen to boost domestic energy production.
OEUK’s calls for climate checkpoints to be clarified follow recent talks between the Liz Truss backing Brexit Opportunities Minister Jacob Rees-Mogg and energy companies including Shell – as first reported in City A.M.
Tory frontrunner and Foreign Secretary Liz Truss is eager to ramp up production to ensure the country’s energy independence – including North Sea oil and gas.
A spokesperson for the campaign said: “Liz is dedicated to boosting our energy supply and doing so quickly – to help bring down the cost of energy and make us less vulnerable to global energy price spikes and malign foreign actors. She understands the need to get our infrastructure up and running quicker, and if elected will work in Government to this end.”
The delays to the licensing round follow gas prices climbing to all-time highs in recent weeks, amid a Russian energy squeeze on Europe – which is escalating fears of supply shortages this winter.
In a new report set to published next week, OEUK is expected to cite fresh data from the NSTA suggesting as much as 15bn barrels of oil could still be salvaged from the UK’s continental shelf with more exploration.
This is almost double the reserves – 8bn barrels – previously forecast by the authorities.
OEUK calculates the UK’s total domestic consumption equates to around a billion barrels per year, suggesting the reserves could support the country’s energy security for decades to come – especially if combined with energy efficiency and more domestic sales.
Currently, 24m homes across the UK are heated by gas boilers, alongside 35-plus gas-fired power stations that produce around 42 per cent of the country’s electricity.
Mike Tholen, OEUK’s sustainability director, said: “The UK’s people, homes and businesses cannot do without these fuels so if the nation stopped producing oil and gas, it would just have to import them. The only alternative would be cold homes, electricity shortages and transport limited largely to bikes and walking. The Ukraine conflict shows the risks of relying on other countries for energy. Our North Sea reserves mean the UK can protect itself – provided we invest – during the transition to a low carbon future.”
The industry body has consistently called for fresh investment in the North Sea to fulfil this potential, and previously warned about the potential effects of the Energy Profits Levy on getting new projects off the ground.
Analysts divided over fossil fuel ramp-up
Andy Mayer, chief operating officer at free-market think tank The Institute of Economic Affairs (IEA) argued that the climate compatibility checklist should be scrapped.
He told City PM that the climate compatibility checklist encourages “ideologues to sabotage North Sea development” while increasing the UK’s dependence on imports and putting up energy prices.
Mayer said: “A poisonous relic of the Johnson years, it should be ditched immediately, along with a host of regulations and taxes that discourage investment. Consistent, competitive carbon prices, are the way to manage climate risks. Not endless box-ticking and communist-era delusions of centrally planning away a global problem from one country.”
Meanwhile environmental groups have raised concerns over the prospect of further drilling in the North Sea.
Greenpeace UK contrasted record low prices for offshore wind secured via the contracts for difference scheme with record wholesale costs, and the effect of gas on emissions.
Philip Evans, oil and gas transition campaigner for Greenpeace UK, said: “Gas is now a staggering nine times more expensive than renewables, and we know it wrecks the planet. So it’s absolutely unfathomable that the government is so fixated on gas, when what’s needed for households and for the climate are genuine solutions.”
Greenpeace UK’s chief scientist Doug Parr also expressed his concerns on social media – noting that it takes an average of 28 years from licences to delivery of oil and gas.
He tweeted: “This doesn’t help energy security. It does help fossil fuel companies.”
Dr Simon Evans, deputy editor of Carbon Brief, calculated that to make up for the loss of Russian deliveries in 2022, the UK would need to increase its output by 138 per cent.
Recent figures from OEUK suggest there was 26 per cent growth in the first six months of the year across UK waters.
Dr Evans argued it was highly unlikely the UK could bridge the difference between its supplies and Russia’s.
He said: “That’s simply implausible, in timescales relevant to the current crisis, and likely impossible regardless of time”
Currently, UK production makes up less than one per cent of global totals, meaning North Sea supplies would not be able to replace lost Russian gas flows and oil barrels amid a squeeze on European gas supplies from Kremlin-backed energy giant Gazprom.
It would also have minimal effect on prices in a global market.
However, OEUK believes further supplies would help shore up domestic energy needs, with the crisis expected to last for multiple winters, enhancing the country’s resilience to supply shocks in other countries.
The Government has been assessing extreme worst case scenarios involving four days of blackouts this winter, and with France experiencing nuclear outages and Norway suffering droughts concerns about overseas dependence continue to rise.
According to the Office for National Statistics, the UK exported more crude oil than it imported last year.
It brought in £17.6bn of crude oil and exported £17.9bn – meaning that to maximise domestic supplies for energy security, domestic business practices would need to change.