Spiralling gas prices and shortages of fuel on the UK’s forecourts have brought into sharp focus the importance of ensuring policy protects the country’s energy supplies throughout the energy transition.
Events of recent weeks have demonstrated the importance of domestic oil and gas production can play in ensuring stable, reliable low cost energy supply. With the appropriate level of Government support the industry can also act as the catalyst for large scale carbon capture and hydrogen development schemes in support of the UK’s net zero goals.
Increasingly companies traditionally involved in oil and gas production are investing in the development of plans for ‘hybrid’ energy projects. This new wave of propositions prioritise repurposing or dual purposing existing infrastructure to enable Carbon Capture Usage and Storage (CCUS) or the development of ‘new energy’ sources such as blue hydrogen.
For instance, some projects, including Neptune’s DelpHYnus development which has been proposed to UK regulator, the Oil & Gas Authority, would combine the two.
There are obvious benefits. DelpHYnus could deliver a 1.8GW hydrogen plant, enough to power more than 500,000 homes, and meeting as much as 36% of the UK’s 5GW hydrogen production target. It would also providing storage capacity for 570 mt CO2, supporting the decarbonisation of the Humber industrial cluster.
Beyond those headline figures, there are a number of perhaps less obvious upsides.
Geographically the location of the project is significant given its proximity to the nearby Cygnus platform, enabling the creation of a low-carbon energy hub around the gas production facility in the UK Southern North Sea.
Clustering future projects around existing assets in this way could deliver further decarbonisation opportunities and strengthen the economic case for the electrification of the platform, a process which can significantly reduce carbon emissions. Traditionally the costs of electrifying an offshore platform are prohibitive as a result of the large distances from shore.
Creating hubs can help extend the lifespan of a platform and dramatically improve the business case for such an overhaul.
Supportive policy and fiscal frameworks for projects such as these will be vital in allowing the industry to ‘scale-up’ renewable production without sacrificing security of supply.
With that support the North Sea can be transformed, providing a home to a new wave of new energy hubs that make best use of existing infrastructure, enabling production of lower carbon energy, and the transport and storage of CO2 into depleted reservoirs and aquifers.
The UK can set the standard for its peers in Europe and beyond.
Research from the International Renewable Energy Agency (IRENA) suggests the lower carbon future we’re striving for will require investment of an estimated $120 trillion in clean energy to meet the Paris Agreement targets. Projections also suggest investment of $1.6 trillion in existing oil and gas production is necessary, if supply is to keep up with global demand.
Despite the huge growth in renewable energy which is very welcome, gas remains the single largest source of baseload power and affordable heat for the country. And it will continue to be so, heating more than 85% of UK homes well into the future.
This means that the UK has not only to think about how we build additional renewables, but also where the gas will come from as we transition to a net zero future. There is a choice between maximising lower cost, lower carbon and secure gas production from domestic sources, or consigning customers and tax payers to higher cost, higher carbon and less secure imported supplies.
By getting the balance right there is the opportunity to protect critical infrastructure, energy security, tax revenues, jobs and supply chains. The oil and gas sector alone supports almost 200,000 jobs and has contributed more than £33 billion to the Treasury since 2010, but is also a critical enabler of the energy transition as recognised by the Government in the North Sea Transition Deal.
