North Sea project approvals for 2024 might be finished already, three months into the year.
Trade body Offshore Energies UK (OEUK) told an audience of 400 industry representatives on Tuesday that “we might not even see any further approvals this year”.
Market intelligence director Ross Dornan said it was down to a general election year hitting regulatory timelines and uncertainty over future policies.
CEO David Whitehouse pointed to the fluctuating fiscal regime, with four changes over the last two years thanks to the windfall tax, acting to “scare off investors”.
Mr Dornan said: “We’re seeing a lot of uncertainty. We’re in an election year where there are divergent policies that’s coupled with, in the last few years, some regulatory timelines which have been stretching and that comes together to make me think that it is possible that we might not even see any further approvals this year.”
North Sea in decline
So far this year, Shell has taken a final investment decision on the Victory field in the West of Shetland, and Mr Dornan said there “are others going through the regulatory process”.
However the risk of an election drawing out approval processes at regulator OPRED could push those timelines.
Last year, UK oil and gas production both dropped about 12% according to OEUK’s latest business outlook report published this week.
The North Sea is now producing around 1.2m barrels per day, around 500,000 less than it was in 2019 – and declining at more than double the rate of the International Energy Agency’s (IEA) desired 5% annual phase out rate.
Equinor’s Rosebank, which was approved last year, picked up volumes in 2023.
© Supplied by Altera InfrastructurHowever only about 28% of lost volumes since 2019 have been replaced through new fields overall.
Mr Dornan said that the UK’s production decline is bad news for energy security and the economy, noting that more than half of the world’s reserves are in countries which Britain has embargoes against.
The International Energy Agency (IEA), which calls for an end to new fields, “doesn’t properly consider energy security considerations”, he said.
“The sector is also currently exceeding our emissions reductions commitments and it’s on track for upcoming milestones as we strive towards 50% emissions reductions by 2030 and more cuts in the future.
“New fields don’t derail this, they can actually help to reduce overall emissions intensity. But it’s really important that we maintain a really sharp focus on this progress as a sector, we need to find a way to deliver on those commitments.”
Oil and gas spend still a £150bn opportunity
Mr Dornan said OEUK sees about £150bn of possible oil and gas expenditure – opex, capex and decommissioning – to 2040.
The market “is still about £15bn a year” for oil and gas, accounting for two-thirds of spend now, but that’s expected to drop to one-third by 2030. By 2040 it could be as low as 10% of overall spend.
However, Mr Dornan pointed to the wider cross-sector opportunity, covering industries including offshore wind and carbon capture, which OEUK expects to hit a cumulative £450bn by 2040.
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