North Sea net zero transition will cost £430billion, says OGTC – Wood Mackenzie report

Positioning the UK North Sea for a net zero future will cost more than £430billion, according to a new report from the Oil and Gas Technology Centre (OGTC) and consultancy Wood Mackenzie.

The reward of creating such an “integrated net zero energy system” – a mix of oil and gas with other renewable sources – is the creation of 200,000 new UK jobs and £2.5trillion for the economy by 2050, according to the research, produced with support from operator Chrysaor and the Scottish Government.

However realising this means the industry and governments need to “focus investment at pace in the coming years” to close the gap on a number of key technologies.

This will require £430bn to be spent globally on development, of which around £270bn is expected to be spent in the UK, according to “Closing the Gap: Technology for a
Net Zero North Sea”.

Some of the areas highlighted by the OGTC are platform electrification, methane leak detection and flaring mitigation for oil and gas, as well as larger blades, taller towers and automated inspection for fixed offshore wind.

It also refers to improving ”blue hydrogen” production (from natural gas) and reducing cost of “green hydrogen” (via renewables), as well as measures to improve economics of carbon capture and storage (CCS) technology, and power off-take solutions for marine renewables like floating solar.

OGTC chief executive Colette Cohen said: “Reimagining the North Sea as an integrated energy system is essential for the UK and Scotland to achieve their net-zero ambitions. But we need to invest now to close the gap on the key technologies needed to make this ambition a reality.

“Leveraging our strength in oil and gas, we can also partner with the renewables sector to accelerate the delivery of the next generation of energy in the UK – and internationally. This is where governments and industry should focus investment at pace in the coming years.”

Renewables and oil and gas will “dominate” investment over the next 15 years, the report states, while the burgeoning hydrogen and CCS industries will see the largest cash injection from 2035 onwards as they mature.

© Harbour Energy

It comes as the industry and UK government are amid talks around a “North Sea Transition Deal” to help protect and shift the industry to net zero by 2050.

The sector is “at the heart of the UK economy”, according to Malcolm Forbes-Cable, vice president of upstream consulting at Wood Mackenzie, “this won’t change, but our energy eco-system will”.

He added: “This report underlines how the UKCS can be redeveloped into a decarbonised, integrated energy system; one that can optimise the offshore sector’s economic value and deliver a secure supply of affordable energy.”

Earlier this week, energy giant BP went against conventional thinking from the global oil industry – that oil demand will continue to grow for decades – saying instead that “peak oil” may already have been reached.

In its lauded Energy Outlook report, even its most bullish scenario showed demand at no better than “broadly flat” for the next two decades, meaning it may not return to pre-Covid levels.

However Oil and Gas UK, the Oil and Gas Authority and others have repeatedly highlighted that fossil fuel demand in the UK remains strong and it is less carbon-intensive to use domestic supply than shipping in from overseas.

Phil Kirk, CEO of Chrysaor said: “Indigenous net zero energy and hydrocarbons to meet British demand is something I am passionate about and Chrysaor, as one of the largest operators in the North Sea, will play a key role in safely and efficiently meeting that demand in a way we can all be proud of.”