Graham Goffey, of the Subsurface Task Force, responds to the North Sea energy policy outlined by the Labour Party.
The Subsurface Task Force comprises scientists and experts, collaborating with regulators and policy makers towards an orderly transition. We promote responsible use of subsurface storage and energy resources to ensure energy security, reduce the UK’s emissions impact and deliver societal and economic value.
Our report “Responsible UK oil and gas for an orderly transition: an evidence-based guide for policy makers” (www.subsurfacetaskforce.org.uk) provides data to assess the Labour Party’s energy policy.
This policy commits to end licensing to explore new fields, as these “would not offer the right answer for the economy or the environment”. An unconfirmed, but yet more destabilising, policy reported by the Guardian also bans new field developments.
Global hydrocarbon demand in most 1.5°C IPCC scenarios, and at present, substantially exceeds the IEA’s Net Zero Emissions (NZE) model. Demand reduction and renewables growth policies and actions are evidently insufficient. Yet 2020/21 global oil and gas expenditure fell to levels inconsistent with rising global demand, contributing to elevated prices.
A major consumer, UK annual demand is 1 Billion boe (barrels of oil and its energy equivalent in gas) and the Climate Change Committee (CCC) projects 15 Billion boe of demand to net zero 2050. Existing fields, undeveloped fields and exploration’s modest contribution could reach perhaps 40% of this figure. Under all circumstances, production falls faster than required by 1.5°C trajectories.
© Supplied by Soliton ResourcesDwindling UK exploration finds a few fields annually, typically 1-2 orders of magnitude smaller than Cambo/Rosebank and averaging just 60 Million boe total p.a. New UK fields are globally insignificant relative for example to nearly 30 Billion boe in new 2022/23 fields in Qatar, Saudi, UAE, USA, Brazil and Norway. But the industry is economically important to the UK, contributing £20 Billion Gross Value Add in 2022/23 and supporting over 200,000 jobs.
Substantial UK oil/gas importation is unavoidable despite Labour’s laudable aspiration to decarbonise the electricity system by 2030, widely viewed as unrealistic. Policies also lack drive to accelerate demand reduction by electrifying heating, transport and industry. Import dependence is expensive – 2022 net imports cost £45 Billion – whilst importers tend to weaker environmental and human rights regimes. UK oil exports are mostly to Europe, supporting regional energy security.
Policy contradictions through misunderstanding?
The NSTA advised government that new licensing is unlikely to materially influence total sector emissions. Small new field ‘tiebacks’ efficiently using existing infrastructure have exceptionally low emissions intensity. Perversely, under Labour’s licensing ban, this lowest carbon production would be eliminated in favour of vastly higher emissions imported oil and LNG.
Labour’s pledges to invest in offshore infrastructure and CCS are, perhaps inadvertently, already being undermined by its policies. Prolonging infrastructure life via new small fields is important for independent companies responsible for 50%+ of UK production. But a poorly constructed windfall tax has hit share prices and borrowing capacity, curtailing investment. Without licensing, policy stability and a balanced tax regime, capital decline will continue, eroding the supply chain, technical expertise, tax base and production revenues critical to de-carbonisation via CCS.
Gas production is the UK’s alternative to Europe’s gas storage, helping keep UK gas below European prices in 2022 when Europe was desperately filling storage. Labour pledges to retain back-up gas-fired power “for energy security”. But undermining investment will increase reliance on just-in-time, ultra-high emissions LNG imports into storage-deficient UK, risking lower energy security than Europe.
Learning lessons from the energy price crisis
High energy prices makes the transition slower and harder, driving energy poverty, costly consumption subsidies, elevated renewables costs and coal demand. Consequently the IEA now urges fossil fuel demand reduction synchronised with low carbon growth to enable an orderly transition.
The CCC’s CEO advised us that their “presumption against exploration” simply echoed the NZE – supply-side policy being a “less sure” area for the Committee, whose mandate excludes energy security. We demonstrate that exploration/production bans are hollow, lacking positive climate impact and, in Denmark, quietly incentivising new fields. Overtly responsible policies include the Dutch North Sea Agreement, where Greenpeace, WWF, government and industries agree that local exploration/production is preferable to higher emissions imports. Similarly pragmatic balancing of global and local climate responsibilities seems to elude Labour. But new UK licensing could exclude high potential areas remote from infrastructure, restricting industry to areas accessible to existing pipelines, platforms and terminals for net zero compliant, low emissions exploration/production. This would allow Labour to avoid a UKCS ‘cliff edge’ with detrimental employment, sustainability, economic and energy security consequences.
Through the North Sea Transition Deal, with Norway we are in the vanguard of stringent regulation and emissions reduction. Some 60% of UK net zero abatement needs could be realised on the UKCS given policies to retain oil and gas investment, companies, skills, technologies and supply chain, eking out UK production in parallel with demand reduction. Progressively re-deploying revenues and skills into energy/carbon storage, hydrogen and renewables would be the right answer for workforce, economy and environment – utilising upstream strengths to help deliver the UK’s transition.
Graham Goffey
Skills Chair – Subsurface Task Force/founder – Soliton Resources Ltd.
