Trade bodies back government’s embrace of North Sea oil and gas industry
Trade bodies across the energy industry have welcomed the government’s decision to support the North Sea’s oil and gas sector, amid political pushback from the Labour party and climate groups.
The government has confirmed 100 new oil and gas development licences – on top of the 33rd licensing round underway – in British waters, two new carbon capture clusters and a consultation on the industry’s tax regime.
Prime Minister Rishi Sunak argued that he wanted to “power up Britain from Britain” and invest in crucial “industries such as carbon capture and storage, rather than depend on more carbon intensive gas imports from overseas”.
David Whitehouse, chief executive of Offshore Energies UK, praised the latest announcements and warned that without new licences, the domestic oil and gas sector risked a rapid decline – with 180 of the 283 active oil and gas fields in the North Sea set to ceased production by the end of the decade.
“The UK needs the churn of new licences to manage production decline in-line with the maturing basin. If we do not replace maturing oil and gas fields with new ones, the rate of production will decline much faster than we can replace them with low carbon alternatives,” he argued.
He believed the new announcements could “help to foster much needed confidence” in the UK’s energy sector, with “an unprecedented amount of private investment” required for the government to meet its net zero targets.
Whitehouse said: “OEUK members share the vision and ambition of all parties on delivering a home-grown energy transition and net zero with potential to spend almost £200bn over the decade. The majority of this could be spent in offshore wind, carbon capture and storage and hydrogen in the right investment environment.”
The two approved carbon capture, usage and storage clusters, Viking and Acorn, have been selected for track 2 funding, gaining access to government support, with Downing Street pledging £20bn in financing for the nascent technology.
Viking will be operated alongside Harbour Energy with backing from oil giant BP, while the Acorn Project has been set up by Storegga, with Shell, Harbour Energy and North Sea Midstream Partners also among its stakeholders.
Carbon capture and storage involves obtaining the carbon dioxide produced by power generation and industrial activity, such as steel or cement making, transporting it and then storing it deep underground such as in rock formations in the sea bed.
The government is targeting 20-30 metric tonnes of carbon capture per year by the end of the decade, which both projects aim to contribute to.
Acorn is targeting the capture and storage of up to 5m tonnes of CO2 annually by 2030, while Viking aims to transport and store up to 10m tonnes of CO2 annually over the same time period and 15m tonnes of CO2 per year by 2035.
The latest selections was welcomed by industry body Energy UK, with director Marta Krajewska considering the technology crucial to the country’s net zero goals.
She said: “These innovative technologies will play an important role for those sectors that will be difficult to decarbonise and there is a genuine opportunity for the UK to lead the world in their development at scale.”
However, the decision to boost oil and gas developments also provoked criticism from the Labour party.
Shadow climate secretary and Labour frontbencher Ed Miliband warned Sunak’s latest policy pledges were “weak and confused” and will “not take a penny off bills”.
He argued the proposals will do “nothing for our energy security” and “drive a coach and horses” through the UK’s climate commitments by encouraging a ramp up in oil and gas exploration.
This follows calls from the International Energy Agency for developed economies to cease further oil and gas exploration to meet climate commitments and the latest report from Westminster’s Climate Change Committee which warned the UK’s continued need for oil and gas did not “in itself justify the development of new North Sea fields”.
Tessa Khan, executive director of Uplift, which is pushing for a green energy transition in the North Sea, argued that the new licences are “giving the oil and gas industry what it wants” but that the “policies don’t help the British public one bit”.
“The only way to deliver an affordable supply of energy, and lower bills, is to move the UK away from expensive oil and gas, by helping people insulate homes and unblocking onshore renewable energy, which is so much cheaper than gas,” she said.
The announcement also powered the shares of oil and gas producers on the London Stock Exchange with Harbour, Ithaca, Serica all making significant gains yesterday – after a challenging period of trading this year.
British Gas-owner Centrica, enrgy supplier SSE and power group Drax also saw an uptick, with company bullish over hopes of securing government support for its biomass carbon capture programme.
By close of play, Serica was rose 6.8 per cent, Harbour picked up 5.4 per cent, Ithaca grew 3.7 per cent, while Centrica reported a 2.9 per cent hie.