North Sea oil and gas projects essential to UK’s energy future, warn academics
Halting future investment in North Sea oil and gas projects jeopardises the UK’s supply security and undermines its ambitions to transition to net zero, according to leading academics studying the energy sector.
The academics told City PM that without more projects, the UK will be reliant on overseas vendors to meet its needs – which is more expensive, more environmentally damaging and less reliable than a domestic industry.
Professor Paul de Leeuw, director of the RGU Energy Transition Institute at Robert Gordon University, argued that shutting down British oil and gas development would do nothing to curtail demand – which was the key focus for emissions, and would simply mean we would have to go to other sources for fossil fuels.
He believed that there was uniform agreement about the need to reach net zero, but that the UK had to be smarter with the “journey to get there” – warning that shutting off domestic fossil fuels could “make the situation worse.”
He said:” If you want to make a big change, focus on reducing demand for oil and gas. Take out the demand we put in our domestic boilers, that we put in our transport system, and for industrial use. This will drive emissions down and drive the use of oil and gas down. Switching off supply isn’t really going to change the dial and therefore I think the focus really needs to be on actually what makes the biggest material difference and that is how we consume the product, not how we produce it.
“If we are still consuming it, and we don’t produce it in the UK, and are obviously importing it, that’s not helping as most of the imports actually come with higher carbon footprints. We might even make the situation worse.”
Professor Alexander Kemp, professor of petroleum economics and director of Aberdeen Centre for Research in Energy Economics and Finance at Aberdeen University, argued there were sound economic reasons to back the domestic fossil fuel sector.
He noted that the Climate Change Committee, Westminster’s independent advisory group, predicts half of the UK’s energy requirements between now and 2050 will still be met by oil and gas, and as much as 64 per cent of UK energy needs between 2022 and 2037.
Kemp also pointed out that 75 per cent of our overall energy needs are met by oil and gas – despite huge advancements in renewable generation.
He said: “It’s against that background that I favour allowing new field developments to take place, subject to the constraint that they have in place to reduce their emissions in the production process – that is… preferably using electricity from renewable sources.
“If these conditions could be met, then from an economist’s point of view, there are gains to be made to the UK energy sector and the UK’s GDP in terms of increased tax revenues and employment. So, to have a blanket rejection of new field developments doesn’t look to me to be economically very sensible.”
Labour push to end North Sea industry
Their comments follow Labour announcing last week that there will be no new oil and gas projects if the party wins the next election.
Its outlook is supported by both the International Energy Agency and International Panel on Climate Change, which have both warned new projects will prevent the UK reaching net zero emissions.
Nevertheless, nearly half the UK’s oil and gas needs are met from domestic supplies, even if the number is declining year on year – with data from the North Sea Transition Authority revealing domestic fossil fuels are set for a steep decline in production this decade.
It has calculated that annual crude oil production will more than halve over the current decade, dropping from 49.34m tonnes in 2019 to 24.62m tonnes in 2028, including a six per cent decline this year.
The NSTA also forecasts that gas production will drop from 37.51m tonnes to 20.49m tonnes over the same period, with a further five per cent decline this year.
This will come alongside a sharp drop in predicted capital expenditure, which NSTA expects to fall from £5.42bn to £2.5bn over the 10-year window, with decommissioning costs rising from £1.39bn to £2.0bn – with the industry hit hard by the toughened windfall tax.
Statistically, pipeline domestic gas is considerably better for the environment than alternatives such as liquefied natural gas from overseas.
Rystad Energy has calculated that LNG deliveries into Europe from the US typically have an upstream imported emissions intensity greater than 70kg of CO2 per barrel of oil [boe] equivalent.
In comparison, piped gas flows into Europe and the UK from Norway has a CO2 intensity of just over 10kg CO2 per boe.
In the face of a declining North Sea industry, the Office for National Statistics revealed earlier this year that LNG imports to the UK reached a record high of 25.6bn cubic meters, rising 74 per cent on the previous year.
Overall, LNG imports accounted for 45 per cent of natural gas imports across the year, and 35 per cent of demand – making it an essential energy source as the continent staved off supply shortages following a Russian supply squeeze.
The UK has since arranged a long-term deal for LNG supplies with the US, in a so-called energy partnership.
Labour has been approached for comment.