The UK government on Dec. 14 promised to support "healthy" levels of investment in the country's upstream and oil and gas industry while at the same time announcing a beefed up role for the regulator in curbing emissions and hastening the energy transition, in a "white paper" to be presented to parliament.
The document, setting out an overhaul of the country's energy system to be enshrined in law, warned the North Sea oil and gas sector that returning to "business as usual" after the COVID-19 pandemic "is no longer an option."
It said future government backing would be "in the context of delivering our net zero target," a reference to the UK's goal of "net zero" carbon emissions by 2050.
This would entail removing regulatory hurdles to the integration of oil and gas facilities with renewable energy, a way of reducing emissions produced in the course of operations, it said, estimating the sector accounted for 4% of UK greenhouse gas emissions in 2018. Industry group Oil & Gas UK has pledged emissions reductions of 50% by 2030 and 90% by 2040.
The paper also noted a new strategy is being developed for the Oil & Gas Authority, to be complete by the end of the year, and promised a "more robust stance" to tackle venting and flaring, associated particularly with exploration and early-stage projects, with the aim of ending the practice by 2030.
The document sought to reassure the industry it was still needed, saying: "We expect industry to respond effectively to the net zero challenge, but will encourage continued healthy levels of investment."
"Ensuring that the UK remains an attractive destination for global capital is the best way to ensure an orderly and successful transition away from fossil fuels," it said.
However, business and energy secretary Alok Sharma also said in a statement that "today's plan establishes a decisive and permanent shift away from our dependence on fossil fuels, towards cleaner energy sources that will put our country at the forefront of the global green industrial revolution."
"We are determined to both decarbonize our economy in the most cost-effective way, while creating new sunrise industries and revitalizing our industrial heartlands that will support new green jobs for generations to come."
Transition deal
The paper offered reassurances on the risk of jobs and skills being lost in the energy transition, saying the oil and gas industry was suited to some energy transition tasks, such as carbon capture and storage projects, and a new "transition deal" would be announced in the first half of 2021.
This would focus on "the opportunities of net zero and providing support for the people and communities most affected by the move away from oil and gas production," it said.
It outlined a "quid pro quo partnership between the government and industry for taking long-term action which transforms the sector and delivers the energy transition," adding: "We will use the deal as a vehicle to create new jobs as well as trade and investment opportunities."
"The deal will also set out how we can retain existing jobs and capabilities," many of them able to help give the UK "first mover advantage in emerging low-carbon sectors," the document said.
The UK produces around 1 million b/d of oil across the North Sea and West of Shetland area -- a little over a third of peak levels in the late-20th century -- and meets around half the country's gas needs.
The industry makes a relatively small contribution in direct taxation of upstream production, estimated at just GBP300 million for the current tax year and GBP800 million in 2021-22 by watchdog the Office for Budget Responsibility. Estimates of the number of jobs supported by the sector range from 150,000 to 270,000, with many of the jobs being relatively well paid and located in Scotland.
