Changes to the UK’s Emissions Trading Scheme will result in Supermajor TotalEnergies (XPAR:TTE) seeing a near £30 million hike in fees.
The UK government recently introduced changes to its Emissions Trading Scheme, however, analyst firm Westwood has found this will have “minimal financial impact on the offshore oil and gas industry.”
After the updates to the scheme come into effect, the UK is set to charge £47 per tonne of carbon dioxide emissions, a 40% discount to the prices imposed by the European Union at £75.86 (€88.50).
The reason the Franch supermajor is being hit harder than most is, process emissions will now be included within the UK ETS from 2025.
Some North Sea sites will see a price hike relating to emissions, namely the Elgin and Franklin Hub.
The Elgin and Franklin Hub will experience increased costs relating to emissions, however, Westwood has found that “the impact on the hub’s economics is minimal.”
The analysts at Westwood Global Energy Group have found that some facilities will be hit harder following the ETS changes, the firm writes: “Facilities which carry out gas sweetening will see a financial impact.”
Gas Sweetening is a process that involves removing CO2, hydrogen sulphides, and mercaptans from natural gas through the use of amines ahead of transport and sale.
The industry analysts say: “In the offshore oil and gas sector the only hub which carries out gas sweetening offshore and vents a significant volume of CO2 is the Elgin and Franklin Hub.”
Assuming an allowance cost of $100 per tonne of CO2, the analytics firm has predicted that the North Sea production hub will incur additional charges of around $38 million (around £29.78m) following the changes to the ETS taking effect.
This would mark an increase in fees of around 40% for the TotalEnergies North Sea production hub.
TotalEnergies was asked for comment.
Tories let green policy slide off the agenda
The Conservative Party has been criticised recently for letting emissions-cutting measures fall down its list of priorities as prime minister Rishi Sunak indicated a readiness to soften green policies and grant hundreds of new oil and gas licences.
The UK Government’s energy security secretary, Grant Shapps has also recently claimed that granting “every single conceivable licence to the North Sea” would be within the country’s net zero targets.
He said: “The IPCC [Intergovernmental Panel on Climate Change], who is the global authority on this, says that to meet net zero by 2050 the world needs to reduce its reliance on oil and gas by four per cent a year. Even if we granted every single conceivable licence to the North Sea … the [UK’s oil production] would decline at seven per cent a year, twice the rate of the IPCC [recommendations].”
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