UK will review how to license North Sea production while achieving net zero emissions

THE UK Government has launched a review into how it will license the offshore oil and gas industry while striving to achieve net zero emissions by 2050.

While the UK uses clean sources for more than half of its electricity supplies, it still relies heavily on oil and gas to heat homes, for transport fuels and feedstocks for plastics, and consumer products.

Business and Energy Secretary Alok Sharma said the sector will continue to be needed for “the foreseeable future” as the UK moves towards net zero and to safeguard jobs in a sector that supports 270,000 jobs and has provided £30bn (US$39.5bn) in tax income. Oil majors have been hit hard by Covid-19, with thousands of jobs being shed as demand for oil has sent prices plummeting.

“Our review into future oil and gas licensing rounds will ensure we are able to meet our net zero target, while protecting jobs across the country,” said Sharma.

Issuing licences for companies to produce more fossil fuel may appear to contradict ambitions to achieve zero emissions. But in announcing the review, the Government pointed out that the scenarios developed by the Committee on Climate Change recognise an ongoing demand for oil and gas in the lead-up to net zero by 2050.

Sharma also noted that the skills of those working in the oil and gas sector will help build a greener economy. This will include developing technologies including carbon capture and storage (CCS) and the hydrogen economy that will help to decarbonise heavy industry.

Alan Whitehead MP, Labour’s Shadow Energy and Green New Deal Minister, said: “A review of this licensing regime is long overdue, as the present regime simply does not fit with UK net zero legislation. Oil and gas will have an ongoing role in the economy, but in the long term this will be reduced to a few industrial processes only, much of which can be supplied from known reserves.

The review’s initial findings and next steps will be laid out in a white paper on energy set to be published alongside this year’s Autumn statement.

Alex Kemp, Professor of Petroleum Economics at Aberdeen University, told Energy Voice that the review could lead to new requirements obliging oil companies to say how they would reduce emissions if they won a licence. This might include integrating oilfield infrastructure with offshore wind, CCS and hydrogen technologies.

Industry group Oil & Gas UK (OGUK) said it has “embraced” the review. CEO Deirdre Michie said it is an opportunity to “shine a light on how our industry is changing” and that the “oil and gas industry is stepping up to the climate change challenge”.

OGUK said it is supporting the Government on a North Sea Transition Deal, which will set out how to decarbonise the sector while protecting jobs.   

The review was announced alongside the results of the 32^nd Offshore Licensing Round by the UK Oil & Gas Authority (OGA). 113 licences have been offered over 260 block to 65 companies. The OGA noted that it will implement net zero considerations as part of a new strategy and that licences awarded in the latest round will be “stewarded under this strategy”.

In the wake of governments setting climate goals, and under pressure from shareholders, oil majors including BP, Shell, Total and Repsol have pledged to reach net zero by 2050.