The UK’s offshore energy trade body says it supports half of the proposed checkpoint tests on new North Sea oil and gas licensing, but that the process ‘must be workable’ or risks damaging investment in the basin.
The trade body for the UK’s offshore energy industry Offshore Energies UK (OEUK), has published its views on the Government’s proposed “climate compatibility checkpoints”, aimed at ensuring any new North Sea licences awarded are in-keeping with the UK’s climate change commitments.
Opened in December, the Department for Business, Energy and Industrial Strategy (BEIS) consultation sets out six potential tests oil and gas producers would have to meet in order to proceed with new developments.
OEUK’s response follows that of the Climate Change Committee in late February, in which the advisory body said it supported “stringent tests” on North Sea licensing and a “presumption against” new exploration, but stopped short of recommending an end to E&P activity.
In its response, OEUK said checkpoints “must be workable and support investor confidence across the exploration and subsequent development of oil and gas resources.”
Summing up the association’s position, operations manager Keith Wise said OEUK and its members were aligned with proposals for tests one, two and three, covering operational greenhouse gas emissions, international benchmarking of emissions and the UK’s status a net importer or exporter of oil and gas.
OEUK has proposed additional amendments to these points, in particular the inclusion of methane emissions and emissions from transportation in these assessments, given the UK’s favourable performance in comparison with global benchmarks.
Mr Wise said OEUK was “neutral” on the fourth test, aimed at incentivising investment in transition technologies such as hydrogen and carbon capture. In its response, OEUK made the case for a “qualitative assessment” of this process, adding that a “binary or threshold type decision-making process would not be appropriate.”
However, OEUK disagreed with proposals for the fifth and sixth tests. These cover, respectively, the inclusion of Scope 3 emissions in the checkpoint, and analysis of the ‘production gap – the difference between the hydrocarbons produced globally and what is “affordable” in terms of meeting global warming commitments.
On the former, it argued that designing a meaningful test based on Scope 3 emissions “is not possible or relevant”. (Notably, in its consultation BEIS concedes that “a full proposal for how the [Scope 3] test would work has not been presented.”)
With regards to latter, OEUK said that the UK’s contribution of less than 1% of global supplies, as well as the long-term decline of the North Sea basin, meant that it was unlikely to have much effect on the production gap.
It also recommended that ‘out of round’ licensing should continue to be subject to the existing regulatory process, rather than the climate checkpoint, given the risk of over complicating the process and slowing investment.
The association reiterated forecasts made by the Climate Change Committee, in which all energy transition pathways show a continued need for oil and gas in meeting the UK’s energy requirements up to 2050 and beyond.
Summing up the sentiment of the association’s members around the proposed licensing checkpoint, Mr Wise added: “A good checkpoint would provide some stability in the best case, [but] in the worst case, a bad checkpoint would harm investor confidence.”
Deirdre Michie, CEO of OEUK, said: “A premature end to licensing is inconsistent with the expected transition towards net zero and would result in higher levels of imports and a higher emissions footprint; it would damage employment and constrain the pace of investment needed to deliver Net Zero and reduce the supplies of skilled labour available to support longer term development of the UK energy market.”
“It’s critical that we have a clear and quantifiable checkpoint that supports the drive for net zero and delivers a managed transition towards cleaner energies, and we welcome the opportunity to continue working with government as these plans move forward.”
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