The Government has published the North Sea Transition Deal which includes up to £16 billion of government and industry investment, a reduction in greenhouses gases and the creation of new skilled employment.
The deal, reached between Government, oil and gas companies and the Oil & Gas Authority (OGA), looks at how the offshore hydrocarbon sector can manage the transition to clean energy.
SKILLS
The commitments set out in the oil and gas chapter of the Government’s Energy White Paper are closely aligned to the Prime Minister’s Ten Point Plan for a Green Industrial Revolution announced in November 2020.
The plan involves £12 billion of government investment and covers clean energy, transport, nature and innovative technologies.
Business and Energy Secretary Kwasi Kwarteng today said that the sector had for decades strengthened the UK’s energy security, generated significant tax revenue for public services, and supported hundreds of thousands of jobs.
He added that the deal ensured oil and gas would be included in the country’s “irreversible shift” 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.”
POINTS IN THE DEAL
The North Sea Transition Deal includes:
– the oil and gas sector commits to early targets to reduce greenhouse gas emissions from production against a 2018 baseline and the Government identifying potential funding opportunities for early offshore electrification.
– the deal will commit to deliver investment of up to £14-16 billion by 2030 in new energy technologies, with the Government delivering a business model to enable carbon capture, utilisation and storage (CCUS) and hydrogen at scale.
– the sector voluntarily commits to achieve 50% local UK content across the lifecycle for all related new energy transition projects by 2030, as well as in oil and gas decommissioning. An industry supply chain champion will be appointed to support the co-ordination of opportunities with other sectors.
– achieving a 60Mt reduction in greenhouse gas emissions, including 15Mt through the progressive decarbonisation of UKCS production over the period to 2030.
– supporting up to 40,000 direct and indirect supply chain jobs in decarbonising UKCS production and the CCUS and hydrogen sectors.
– Government investment of £6.3 million in the Global Underwater Hub, and a further £2m to develop the deal, helping to support the sector to play a leading role in meeting the UK’s net zero ambitions.
– Supporting the Government’s prompt payment initiative by championing the prompt payment code.
OGA PRINCIPLES
OGA’s chief executive Dr Andy Samuel said that the deal embodied the authority’s three main principles vital to a successful energy transition.
These include cleanly meeting the UK’s energy needs and the recognition that oil and gas, with associated capital and infrastructure, was crucial to progress alternative energies such as floating offshore wind and hydrogen, and carbon capture and storage.
The deal also recognised the OGA’s third principle of employment with some 270,000 UK jobs dependent on the oil and gas sector.
This would be achieved with the establishment of the Aberdeen Energy Transition Zone and a Global Underwater Hub to safeguard jobs, anchor the UK’s world-class subsea expertise in the region and create new skilled jobs and opportunities.
“This agreement provides a solid platform for a just transition to net zero,” added Dr Samuel.
“In line with the government’s build back greener agenda, it clearly signposts how central energy transition is to the Government’s thinking, in terms of economic recovery and in the run up to COP26.
“The deal, and the commitment to climate-compatible future licensing rounds, should provide confidence for investors along with the many thousands of people whose livelihoods depend on the North Sea.”