CCC responds to proposed assessment of new North Sea oil and gas

THE Climate Change Committee (CCC) has responded to the UK Government’s consultation on the proposed “climate compatibility checkpoint” for future oil and gas licensing in the North Sea, saying that while it welcomes the proposal it also encourages stringent tests on future licensing and later development stages.

The idea of a climate compatibility checkpoint for future oil and gas licensing in the North Sea was first proposed in March 2021 as part of the Government’s North Sea Transition Deal. The deal aims to support industry workers through the energy transition, and doesn’t rule out new oil and gas exploration as long as it aligns with the UK’s climate objectives. The checkpoint would come into effect before the Oil and Gas Authority (OGA) initiates a new licensing round and consists of a series of potential tests. This was followed by the launch of a consultation on the proposed checkpoint in December last year.

The CCC has now released its response to the consultation in the form of a letter from Lord Deben, Chairman of the CCC, to Business Secretary Kwasi Kwarteng. The CCC welcomed the proposal but has encouraged the Government to consider several key areas.

The CCC said that it is concerned that the checkpoint is too narrow. The consultation says that the checkpoint would only act on new licences, claiming that licences already awarded are already subject to checks under the OGA’s revised strategy “which is effectively a net zero test”. According to Carbon Brief, a large number of oil and gas projects already have a licence but are awaiting development consent or final investment decisions. This could lead to the approval of 46 projects between 2022 and 2025 which would not be subject to the checkpoint. The CCC said that emissions implications should be taken into account for licences already issued. It also added that under typical timescales, a new licensing round would not lead to new production until the 2030s or 2040s, at which point UK oil and gas consumption should be much lower.

The CCC emphasises that the checkpoint needs to factor in the necessary decline of oil and gas. The IEA has said that no new oil and gas development can take place if the world is to get on track to reach net zero. The CCC said that there is also a risk that without policy on supply, that extraction will exceed carbon budgets. This is also the conclusion of the UN Environment Programme in its most recent Production Gap Report which said that that the global planned production would result in 57% more oil and 71% more gas in 2030 than would be consistent with a 1.5^oC pathway.

The letter says that an end to UK exploration would send a strong message to investors and consumers on the UK’s commitment to the 1.5^oC target. It said it would have a domestic impact to have the Government fully aligned with net zero, rather than being undermined by proposed projects such as the Cumbria coking coal mine. Such a commitment would also likely strengthen the UK’s position internationally as current COP President.

There have been recent arguments made that increasing oil and gas production in the UK, including lifting the moratorium on fracking, would help to mitigate the current energy price crisis. However, the CCC made it clear that increases in oil and gas production will not solve the problem. “Oil and gas prices faced in the UK are set internationally. The best way of reducing the UK’s future exposure to these volatile prices is to cut fossil fuel consumption on the path to net zero – improving energy efficiency, shifting to a renewables-based power system and electrifying end uses in transport, industry and heating. Any increases in UK extraction of oil and gas would have, at most, a marginal effect on the prices faced by UK consumers in future.”

Considering the impact on the economy, it said that the best approach to reducing impacts of fuel poverty is to reduce demand for fossil fuels through policies that enable a cost-effective switch to low-carbon alternatives and improved efficiency. It cited the recent analysis by Carbon Brief which showed that UK household energy bills are £40/y (US$54/y) higher under the current price cap than they would have been if energy efficiency measures had been kept in place by previous Governments.

It considers the potential impact of production on global emissions, which would likely result in two effects that would somewhat offset each other. New production would result in lower upstream emissions, as the footprint of UK extraction is lower than the global average. However, it would lead to higher global fossil fuel consumption. The CCC said that it can’t conclude with confidence how exactly new production would impact on global emissions as evidence for both potential effects is inconclusive.

It also considered the impact of North Sea development on the UK’s reliance on imports, saying that the UK’s imports of oil and gas are expected to fall if consumption drops in line with the Government’s Net Zero Strategy.

Colin Axon, Senior Lecturer in the Institute of Energy Futures at Brunel University London, said: “The CCC recognises that there are considerations beyond their narrow remit. One of these considerations is energy security, which needs to account for (amongst others) import dependency, risks associated with where oil and gas is produced, and fluctuations in the competitive global market. The CCC recognises that UK extraction activity has a low carbon footprint relative to other producer countries. As oil and gas will be needed in the future, UK production will lower import dependency to some extent whilst retaining jobs and expertise. The Government must ensure that the desire for a net-zero society does not run ahead of the practicalities of delivering engineered systems needed to achieve that goal.”

“We need to remember that about 15% of oil production is used for petrochemicals and there will be an enduring need for these molecules and products, some of which will be very hard to replace. Natural gas is also an important feedstock for many products, including fertiliser, although some alternative manufacturing routes may be possible to manufacture ammonia.”

“Whilst oil and gas are to be used in the UK for one purpose or another, it would be prudent to use some indigenous reserves and retain a technical capacity.”