Associate Feature: Powering Change
With Glasgow playing host to the crucial UN climate change summit later this year, there is increased focus on the North Sea oil and gas sector and its role in meeting emissions targets.
The industry says it’s ready not only to assist in the transition to new greener forms of energy, but also to help in the national effort to reach net zero with the roll out of technologies such as carbon capture.
The stakes couldn’t be higher. In a report published earlier this month, the UN’s Intergovernmental Panel on Climate Change (IPCC) warned that within two decades, temperatures are likely to rise by more than 1.5C, breaching the ambitions set in the 2015 Paris climate agreement and leading to increasingly extreme weather.
In 2019, the UK became the first major economy to put a net zero target into law, a goal that must be met by 2050. In Scotland, that target comes even sooner in 2045.
Deirdre Michie, chief executive of industry body OGUK, says that while committed to the government’s emissions targets, oil and gas will continue to meet a large part of the country’s energy demands in the years ahead.
“The Climate Change Committee needs us to deliver net zero by 2050 and references that we will need oil and gas, albeit in a declining context,” she says.
“Currently, oil and gas supplies around 75 per cent of the UK’s energy. That figure will still be around a fifth in 2050 and beyond.”
But with the Conference of Parties (COP26) due to get underway in Glasgow at the end of October, attention has understandably turned to fossil fuel extraction and the controversy around the prospect of new drilling at the Cambo field off Shetland.
On a visit to Scotland earlier this month, Prime Minister Boris Johnson said, “contracts that have been signed should not be just ripped up”.
While in a response to a recent parliamentary question on Cambo, energy minister Anne Marie Trevelyan pointed out “the UK is a net importer of both oil and gas and reducing domestic production would only lead to higher imports from other countries on a net basis.”
Lying 75 miles west of Shetland, the field is thought to contain more than 800m barrels of oil.
While an exploration licence was granted in 2001, the UK Oil and Gas Authority is still considering whether to approve extraction.
Michie says that if projects like Cambo are not given the go-ahead, then the UK would have to import supplies from countries which may have less environmental ambition.
Jobs and skills in the North Sea would be lost – both of which are still needed to realise the full potential of a diverse future energy mix.
“We consider the production (from Cambo) will be required by the country and if (the approval) doesn’t move forward, we’re going to have to import to make up for the gap that would open up,” she says.
“And there’s 1,000 jobs on the back of Cambo, £1.9bn in terms of investment. The key thing is the skills and expertise that support Cambo are the same skills and expertise that are supporting the energy transition.”
Indeed, Michie believes that far from being part of the problem, her industry can help lead the way to net zero, drawing on decades of expertise to help develop cleaner forms of energy, scaling up technologies such as offshore wind, carbon capture and the use of hydrogen.
But doesn’t allowing new oil drilling undermine the UK’s attempts to show international leadership in the run-up to COP26?
“You show leadership by recognising that we have to have a managed transition,” Michie says.
“That we’ve got to do it in a way that is planned, that must move at pace, but also addresses the fact that we’re still going to need oil and gas.”
As part of the commitment to net zero, the sector agreed the North Sea Transition Deal with the UK Government earlier this year.
As well as setting out a 50 per cent reduction in offshore production emissions by 2030 on the way to net zero by 2050, the Deal also included investment of up to £16bn in new technologies such as carbon capture and the use of hydrogen at scale.
Michie and her organisation believe the deal can provide an example of the sort of agreement that can be reached at COP26, albeit on a much grander scale.
“The vision for the North Sea is as an integrated energy sector,” Michie says. “We will continue to see offshore oil and gas platforms, although there will be less of them. We’ll see offshore floating wind; we will see the development of carbon capture and storage solutions. I think the North Sea has a really strong role to play and opportunity to take.”
Under the Transition Deal, the sector also has a key role to play in helping other energy-intensive industries cut their emissions, a major part of ensuring the UK achieves net zero.
One of the key mechanisms for this will be the increased use of carbon capture, where CO2 emissions are separated from other gases produced during industrial processes and injected into rock formations deep underground for permanent storage.
Carbon capture technology is expected to be installed at the coal-fired Peterhead power station by 2026 – 20 years after the idea was first mooted.
The project is a partnership between the site’s owner, SSE Thermal, and Norwegian energy company Equinor.
Despite some false starts for carbon capture in the past, Michie reiterates its importance, as well as how the oil and gas sector’s experience is central to the success of these new technologies, with Aberdeen, once the “oil capital of Europe,” set to be at the centre of that new reality.
Indeed, the Aberdeen Energy Transition Zone (ETZ) is currently being developed at the city’s south harbour and is expected to directly support 2,500 green jobs by 2030, alongside a further 10,000 transition-related jobs.
Earlier this year, the Scottish Government announced £26m of funding for the development, matching the money already pledged by the Treasury.
“There is a massive opportunity for the oil and gas sector and for Scotland to take the lead,” Michie says.
“It won’t be easy – this is not going to happen overnight and it’s really challenging.
“We need to find a balance between where we are today and where we want to be. We need to ensure that the skills and expertise that we have in the industry transfer into these emerging sectors. We could see those jobs going elsewhere if we don’t move quickly enough.
“That’s what the North Sea Transition Deal is trying to drive forward, making sure there is a clarity around the steps that need to be taken so that we can do so at pace.”
The rapid decarbonisation needed to minimise the worst impacts of climate change will mean moving quickly.
Publishing its report earlier this month, the IPCC said the world would have just a few short years to act to prevent warming going above 1.5C.
While obviously keen to retain oil and gas jobs in the North Sea, the industry knows that it risks losing out on the green jobs of tomorrow if it and other key players don’t act quickly enough.
“We have the skills, we have the expertise,” says Michie. “Many of our companies are already in these other energies…we are changing as a sector, but we need to be thoughtful about the balance of continuing to support the Scottish economy in terms of jobs and communities and supporting those jobs and communities to transition to new energies.
“We can point to great examples of companies, our members, continuing to invest in the UK, but we need to make sure we remain competitive and an attractive proposition for companies to come and invest. That’s true in an oil and gas context and when it comes to emerging energies. That’s why you need the government backing both.”
Some of the warnings about the future impact of climate change are stark.
Asked if she worries about that, Michie says: “Absolutely. I represent companies and people who are committed to doing a good job in an oil and gas context, but also, we’ve got families and friends who are all concerned about climate change and want to do their bit and want to see the sector doing its bit. We’re quite passionate as a sector about taking action and demonstrating that we are changing.”
This article was sponsored by OGUK