Offshore Energies UK (OEUK)

As UK’s offshore oil & gas industry slashes emissions, low-carbon era inches closer

The UK’s representative body for the offshore energy industry, Offshore Energies UK (OEUK), has revealed in a new report that Britain’s offshore oil and gas industry has taken decarbonization challenges by the horns and made strides towards ushering in a low-carbon future by curbing its emissions footprint by 24% compared to 2018 levels.

Offshore Energies UK (OEUK)

Offshore Energies UK’s Emissions Report 2023 estimates that emissions from the production, transport, and processing of oil and gas in the UK fell to the equivalent of 14.28 million tonnes of CO2 in 2022, compared with the 2018 figure of 18.9 m tonnes, representing a fall in emissions of 24%. The good news does not end there, as the oil and gas industry also halved flaring and venting and cut methane emissions by 45% compared to 2018. OEUK claims that this demonstrates the sector’s continuous commitment to decarbonization.

Furthermore, these emission reductions are in line with the ambitious commitments under the North Sea Transition Deal, in which the industry committed to reduce emissions by 10% by 2025, 25% by 2027, and 50% by 2030. OEUK explains that most of the reductions made so far have been achieved through operational improvements, process optimization, and the decommissioning of older assets.

However, this report also warns that the UK’s carbon footprint has the potential to increase by 50 million tonnes of CO2e by 2050 – the equivalent of the entire UK population flying from London to Glasgow almost five times over – if no new investment in domestic oil and gas production is made. This is due to the country being in danger of becoming increasingly reliant on imported liquid natural gas (LNG), which is often produced and shipped to the UK from countries with less commitment to reducing the environmental impacts of production.

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Moreover, Offshore Energies UK forecasts that in a best-case scenario, where investment in domestic oil and gas production is sustained to prevent a rapid overreliance on imports, the industry could still provide 50% of Britain’s oil and gas needs by 2030. In this scenario, the sector is expected to halve its emissions by 2030, meet net-zero by 2050, and continue to support UK jobs and the economy while developing solutions like wind, hydrogen, and carbon capture.

Michael Tholen, OEUK Sustainability and Policy Director, commented: “We have a key role to play in helping the UK tackle the energy trilemma: reducing emissions and energy costs while improving the availability of secure supplies of energy. The sector has shown continuous commitment to decarbonization – achieving a third consecutive year of emissions reductions, halving flaring and venting, and cutting methane emissions by 45% in 2022.

“Even though the sector is making big strides, progress is starting to slow. The low-hanging opportunities, like operational improvements and cuts to flaring and venting, having already been achieved. Further reductions will now rely on large-scale, capital-intensive projects – so we need to make sure the UK becomes an irresistible place to do business to scale up these solutions.”

Four policy pillars to boost investment

The trade body elaborates that most of the offshore oil and gas industry’s emissions come from generating the energy needed to power offshore installations, including safety systems, plus electricity and heat for the workforce. Therefore, further emissions reductions are anticipated to increasingly rely on major capital projects, such as powering offshore rigs with renewable electricity, known as electrification.

As a result, OEUK underscores that these solutions will only be viable with timely access to the National Grid as well as “an attractive environment” for investors to support the installation of wind farms. With this in mind, the trade body has laid out four policy actions for the government to attract the investment needed to cut emissions and ensure the UK makes the most of its domestic energy resources.

The first of these actions points out that the government needs to turn Britain into an attractive destination for investment in offshore energy. Bearing this in mind, the OEUK emphasizes that the Energy Profits Levy casts a shadow on investment and makes it much harder to secure long-term investments in the production assets and infrastructure needed to electrify offshore operations. While decarbonization mechanisms, now seen as part of the fiscal regime, serve a vital role in facilitating investment across the energy sector, they are expensive, thus, this should be taken into account and tackled.

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The second of these actions recommends the adoption of a whole-system approach to decarbonization that accounts for upstream and downstream activity, with clear accountabilities for the industry, regulators, and government. This will require alignment between regulatory, government, and industry bodies to ensure the decarbonization of offshore assets is timely, consistent with the delivery of emissions targets, and reflects the wider business environment, says OEUK.

The third action indicates the need to ensure the UK’s oil and gas production facilities are seen as part of a wider integrated energy system. OEUK underlines that the remit of the future system operator (FSO) needs to adopt a cross-sector approach that aligns with other regulators’ remits while infrastructure development needs to make the most of the UK’s energy resources both onshore and offshore to support the growth of the economy.

The fourth and final action outlines that the government should ensure the UK Emissions Trading Scheme (ETS) supports progressive decarbonization and avoids prematurely shutting down activity, as the volatility of the UK ETS scheme has made it harder to plan long-term investments.

“Our energy future can be secure, sustainable and provide growth opportunities for UK businesses and people – but only if we have the right support from governments to make the most of our supply chain, skills, and infrastructure. The decarbonization of our sector, and indeed the entire UK economy, will rely on supportive energy policy across the whole energy landscape, so we welcome any action from government that aims to attract investment and accelerate our drive to net-zero,” concluded Tholen.

The report shows that the UK greenhouse gas emissions were 417 million tonnes in 2022, and the offshore oil and gas sector contributed 3.4% of that. While the carbon footprint of UK gas is on average almost four times lower than imported LNG, it is more than twice as large as pipeline imports from Norway, whose basin is similar to the UK Continental Shelf (UKCS). As a result, the low carbon intensity of Norwegian gas should act as a spur to further clean up UK production.

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David Whitehouse, Offshore Energies UK CEO, said: “The decarbonization of our economy is one of the greatest opportunities and challenges of our time – policy decisions made today will impact opportunities of the future. We know that prioritizing a homegrown transition – protecting our country’s energy security, jobs and communities – will unlock the greatest benefits to the UK economy. If delivered successfully, it will spur economic growth, support jobs, and allow reliable supplies of homegrown, cleaner energy in the UK, for the UK. 

The reality of the energy transition is that we need both oil and gas and renewables in an integrated system to protect the UK’s energy needs. We must create an irresistible investment environment in the UK if we are to realize the full scale of opportunities – billions of pounds worth – that we see in wind, hydrogen, and CCS, alongside oil and gas, and grow a UK energy supply chain to match, making the most of our North Sea heritage.”