The UK government has pledged that high-skilled oil and gas workers and the supply chain will not be left behind in the transition to a low carbon future as the landmark North Sea Transition Deal is agreed with the industry.
The UK government said on Wednesday that the sector deal between the government and oil and gas industry will support workers, businesses, and the supply chain through this energy transition.
This will be achieved by harnessing the industry’s existing capabilities, infrastructure and private investment potential to exploit new and emerging technologies such as hydrogen production, carbon capture usage and storage, offshore wind, and decommissioning.
Through the deal, the oil and gas sector, largely based in Scotland and the North East, government and trade unions will work together over the next decade and beyond to deliver the skills, innovation, and new infrastructure required to decarbonise the North Sea production.
The government emphasised that, not only will the deal support existing companies to decarbonise in preparation for a net-zero future by 2050, but it will also create the right business environment to attract new industrial sectors to base themselves in the UK, develop new export opportunities for British business, and secure new high-value jobs for the long-term.
According to the government, extracting oil and gas on the UK Continental Shelf is directly responsible for around 3.5 per cent of the UK’s greenhouse gas emissions.
Through the package of measures, the deal is expected to cut pollution by up to 60 million tonnes by 2030 including 15 million tonnes from oil and gas production on the UK Continental Shelf – the equivalent of annual emissions from 90 per cent of the UK’s homes – while supporting up to 40,000 jobs across the supply chain.
North Sea Transition Deal
The key commitments in the North Sea Transition Deal include the sector setting early targets to reduce emissions by 10 per cent by 2025 and 25 per cent by 2027 and has committed to cut emissions by 50 per cent by 2030.
Another key commitment is a joint government and oil and gas sector investment of up to £16 billion by 2030 to reduce carbon emissions. This includes up to £3 billion to replace fossil fuel-based power supplies on oil and gas platforms with renewable energy, up to £3 billion on Carbon Capture Usage and Storage, and up to £10 billion for hydrogen production.
Furthermore, by 2030, the sector will voluntarily commit to ensuring that 50 per cent of its offshore decommissioning and new energy technology projects will be provided by local businesses, helping to anchor jobs to the UK.
Finally, the deal includes the appointment of an Industry Supply Chain Champion who will support the coordination of local growth and job opportunities with other sectors, such as Carbon Capture Usage and Storage and offshore wind.
New Climate Compatibility Checkpoint
The UK government will therefore introduce a new Climate Compatibility Checkpoint before each future oil and gas licensing round to ensure licences awarded are aligned with wider climate objectives, including net-zero emissions by 2050, and the UK’s diverse energy supply.
This Checkpoint will use the latest evidence, looking at domestic demand for oil and gas, the sector’s projected production levels, the increasing prevalence of clean technologies such as offshore wind and carbon capture, and the sector’s continued progress against its ambitious emissions reduction targets.
The UK government believes it is vital that any future licenses are granted to industry only on the basis that they are compatible with the UK’s climate change objectives. A dynamic checkpoint enables the assessment of ongoing domestic need for oil and gas, while expecting concrete action from the sector on decarbonisation.
If the evidence suggests that a future licensing round would undermine the UK’s climate goals or delivery of net-zero, it will not go ahead.
The UK government will design and implement the checkpoint by the end of 2021 through extensive engagement with a wide range of stakeholders.
The UK government has announced it will no longer provide support for the fossil fuel energy sector overseas from 31 March 2021. This follows the Prime Minister’s commitment to end taxpayer support for fossil fuels projects overseas as soon as possible at the Climate Ambition Summit last December and the decision on the date to end this comes after consultation with the industry.
This will include UK Export Finance support, international aid funding, and trade promotion for new crude oil, natural gas and thermal coal projects – with very limited exceptions.
Business and Energy Secretary, Kwasi Kwarteng, said: “We will not leave oil and gas workers behind in the United Kingdom’s irreversible shift away from fossil fuels. Through this landmark sector deal, we will harness the skills, capabilities and pent-up private investment potential of the oil and gas sector to power the green industrial revolution, turning its focus to the next-generation clean technologies the UK needs to support a green economy”.
The government’s independent Committee on Climate Change recognises the ongoing demand for oil and natural gas, including it in all scenarios for how the UK meets its target for achieving net-zero emissions by 2050.
Energy Minister, Anne-Marie Trevelyan, said: “We need to urgently end our reliance on fossil fuels and through our pioneering North Sea Transition Deal we will do so without putting our economy and communities at risk.
“While the future oil and gas sector will look very different to how it does today, the industry, businesses and supply chains it supports will have a new mission to help the UK decarbonise and develop the clean technologies of the future, as we lead the green industrial revolution”.
UK government Minister for Scotland, David Duguid, said: “This is not just about making the transition from hydrocarbons to renewables. It’s about a transition of jobs, skills and expertise as well.
Commenting on the North Sea Transition Deal, Chief Executive of Oil & Gas UK, Deirdre Michie, said: “It will unlock billions of pounds of investment and see government and industry work together to deliver a homegrown energy transition, realising innovative low carbon solutions that can be exported globally”.
Chief Executive of the Oil & Gas Authority, Dr Andy Samuel, said: “As long as oil and gas remain part of the UK’s energy mix, they must be produced more cleanly and in line with net-zero”.
“Our studies show how the UK Continental Shelf can provide 60% of the UK’s overall carbon reduction requirements to meet Net-Zero 2050, through electrification, carbon capture and storage, hydrogen and offshore wind”.
To aid the transition to a green economy, today’s package follows the recent Budget in which the Chancellor committed to funding that targets the oil and gas sector and supports businesses to develop green energy.
This includes up to £27 million for the Aberdeen Energy Transition Zone to transform the area into a green energy hub, and up to £5 million additional funding for the Global Underwater Hub based in Aberdeen to open-up opportunities for the city to become a global hub for underwater engineering, including in offshore wind and hydrogen.
‘Companies must be prepared to address climate-related risks’
The government noted that, to ensure the UK economy remains competitive and resilient on the path to net-zero, companies in all sectors must be prepared to address their climate-related risks and opportunities.
This is why the government has also published proposals setting out how the UK’s largest companies and professional services firms representing £4 trillion in turnover will be required to prepare for the transition to a low carbon economy.
As explained by the government, these proposals will ensure the UK’s most significant companies are analysing, understanding and disclosing their climate-related risks and opportunities to unleash a wave of private capital necessary to reach net-zero emissions by 2050.