North Sea ‘needs investment’ to meet net zero targets
North Sea decline is now being managed
The transition of the North Sea oil and gas industry to a green energy future will depend on government encouraging continued investment, according to the sector’s trade body.
Ross Dornan, market intelligence manager at Oil & Gas UK, warned that halting new exploration licences, as UK ministers are said to be considering, and deterring investment in new projects would harm Britain’s capabilities and the development of new technologies.
Mr Dornan, speaking ahead of OGUK’s 2021 Business Outlook report, said any erosion of government support would also make Britain more reliant on imports could affect how investors view the UK.
He said the North Sea Transition Deal was a partnership between the industry and government that would act as a catalyst to unlock investment and jobs.
He said details would emerge in the spring and that there had been “constructive progress in a number of areas”.
After the dip in demand caused by the pandemic he said the oil and gas industry was now looking at managing decline.
“There was a 20% increase in production between 2015 and 2019, but we have not seen the same level of investment, so we do envisage that the basin will revert to decline, though we did not see it being so fast,” he said.
“Towards the middle of the decade there will be stabilisation, but longer term there will be decline and it is important we manage that decline.”
OGUK chief executive Deirdre Michie said: “£3bn worth of investment has been deferred from company plans in 2020 and 2021 – and the effects of COVID-19 have really undermined energy communities, causing a rise in unemployment and a slump in activity.
“A climate-friendly future needs significant investment in indigenous opportunities so companies right across the sector can continue to develop low-carbon solutions.
“That is why we are working with the government to deliver a transformational North Sea Transition deal, which will drive forward Carbon Capture and Storage, hydrogen and low-carbon projects across the UK.
“This is an industry which continues to play a critical role in the economy, supporting hundreds of thousands of jobs in industrial heartlands across the nation, generating affordable energy for millions and providing billions in value to the economy.
“But we cannot continue on this trajectory without vital support. Companies are in a fragile state. We need the recognition that our industry is a key player in a successful energy transition – one which won’t be possible without the inclusion of our sector.”