Sunak to maximise oil and gas production despite backlash, and confirms two new CCUS clusters

THE UK government has unveiled plans for two new carbon capture usage and storage (CCUS) facilities, at the same time of committing to oil and gas by announcing it will award hundreds of new production licences starting in autumn – a move it says will make the UK more energy independent, while mitigating the need for higher-emission imports.  

However political opponents and environmental groups have lambasted the licensing decision saying permitting new drilling when the world has seen record temperatures in the last month is “selfish and shortsighted”. Some of Sunak’s own senior Conservative party politicians have also criticised the plan saying that it threatens the government’s ability to lead on climate internationally. 

Announced ahead of a visit to Aberdeenshire to promote Scotland’s role in the energy sector, prime minister Rishi Sunak backed the controversial move saying that oil and gas is vital to driving forward and investing in clean technologies, such as CCUS. 

“We’re choosing 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,” Sunak said. 

To further support the proposal, ministers quoted a new analysis by North Sea Transition Authority (NSTA) – the same organisation responsible for handing out the licences – that extolls the virtue of domestic gas production over imports due to its smaller carbon footprint.  

“The research shows that domestically produced gas is on average almost four times cleaner than importing gas in LNG form. This is because of both the way the gas is transferred and, in some cases, the methods of extraction,” the NSTA reports says. 

Issuing licences is an ongoing process. It started in the 1970s, and currently, the 33rd offshore oil and gas licensing round is in operation. The round was launched in October 2022, and in January it was confirmed that 115 bids had been received. Ministers expect the first of the new licences to be awarded in the autumn, with the round expected to award over 100 production licences in total. 

Production licences enable a company to explore for, and then drill to extract oil and gas. It is subject to further permits along the way, and not all the licences will lead to oil and gas being produced. That’s because it can take as long as 15 years just for the exploration and appraisal phases, and a further 4-10 years to develop the site ready for production.  

The government said it could speed up the process, by offering the new licenses near to currently licensed areas so that reserves can be brought online faster due to existing infrastructure and previous relevant assessments. 

But, despite the claims of “secure” and “clean energy”, opposition to the new licences is strong, and many say it is sending out the wrong signal about the UK’s green ambitions. Oxfam UK called the policy a wrecking ball through the UK's climate commitments, while Friends of the Earth said Sunak's decision is "pouring more fuel on the flames". 

Greenpeace said that ditching climate pledges for more oil and gas as the world burns would be political and economic folly. 

The environmental group pointed out that fossil fuels aren’t nationalised in the UK, so any newly extracted oil and gas belongs to the company doing the extracting, and will be sold to the highest bidder on international markets. “Despite the government’s claims, this licensing round will not make the UK more energy secure or lower bills – but it will make oil and gas giants a lot more money,” Greenpeace said. 

Ed Miliband, the shadow climate and net zero secretary, reiterated the point saying that the government’s “weak and confused policy,” will not take a penny off bills “as his own party chair has admitted”, and will do nothing for our energy security. 

CCUS smoke screen

Tied up with the fossil fuels announcement, is the news that Acorn in Northeast Scotland and Viking in the Humber have been chosen as the third and fourth CCUS clusters in the UK. 

Acorn, which missed out when two other sites were chosen for such facilities in 2021, has already signed MoUs for carbon capture collaborations with Ineos and Petroineos, a joint venture between PetroChina and Ineos.  

Meanwhile, BP bought  into Harbour Energy’s plans to develop the Viking CCS transportation and storage project earlier this year. 

Along with the two industrial CCUS clusters previously unveiled – HyNet cluster in North West England and North Wales, and the East Coast Cluster in the Teesside and Humber - together, these four clusters will build a carbon capture usage and storage industry, which could support up to 50,000 jobs in the UK by 2030, the government said. 

Although news of the clusters was a welcome one, some academics noted what could be funding shortfalls, while others were vocal that new extraction licenses should be conditional on responsible CO2 disposal – a cost that should be footed by the companies involved in drilling, and not one left to the taxpayer.  

Geoffrey Maitland, professor of Energy Engineering at Imperial College London and a former president of IChemE, said: “To get these projects in place as soon as possible requires billions of pounds investment, so exactly how much will go to the company consortia involved and is there any new money in addition to the £20bn over 20 years committed to CCS in the 2023 budget?” 

Stuart Gilfillan, at the University of Edinburgh, said: “Whilst it is fantastic to see this much-needed investment in carbon capture and storage, it is extremely disappointing to have it used as a headline grabbing smokescreen to distract from a further oil and gas licensing round. 

“If Rishi Sunak and his government were truly serious about meeting net-zero, then he would mandate the capture and storage of all of the CO2 emissions that will result from these new licenses as a condition of them being awarded.” 

Many simply advocated for a greater push towards renewables, such as Cameron Hepburn, director of the Smith School of Enterprise and the Environment at the University of Oxford, who said that solar and wind are already the cheapest forms of electricity in the UK, and the faster we transition, the more money we will save. “The evidence so far also suggests that green jobs are likely to benefit from higher wages with less susceptibility to automation. By tying ourselves to fossil fuels for the longer term, we risk being left behind as the world races to a clean energy future.”