UK oil, gas industry 'social license to operate' under threat: OGA chairman

London — The UK oil and gas industry's "social license to operate" is under serious threat and there is no scope of a second chance given the realities of climate change, the chairman of the UK industry regulator said Wednesday.

Tim Eggar, speaking to industry leaders in Aberdeen, said companies must do more to help solve the challenges of climate change and the drive to net zero carbon emissions.

According to a transcript of his speech, Eggar said it was "quite feasible" for the UK Continental Shelf to be carbon negative by 2050.

But, he said, the biggest challenge facing the industry is "the speed of the shift in public and industry opinion on climate change."

"I have been through a number of oil price cycles but I cannot remember anything like the industry rethink of the last few months. Clearly, climate change is happening right now. That debate is over. The framework, the license to operate for the industry, has changed fundamentally and -- unlike the oil price -- forever," Eggar said.

"If the industry wants to survive and contribute to the energy transition it has to adapt," he said.

NET ZERO LAW

The UK last year implemented a legally binding target to reach net zero emissions by 2050, compared with the previous target of at least an 80% reduction from 1990 levels.

"We have to do everything we can to contribute to achieving this," Eggar said.

He said that oil and gas would remain "an important and critical part of our energy mix for the foreseeable future as we transition to net zero."

"Indeed, without gas we cannot transition to net zero."

But, Eggar said, the oil and gas industry should be "the leader in developing some of the solutions to tackling climate change, rather than continuously being seen as the problem or the blocker."

He pointed to some examples of companies taking the initiative by setting carbon-reduction targets from operations and putting in place programs to reduce flaring and venting and increase efficiency.

He said there had also been good early work on carbon capture and storage.

'ACTION, NOT JUST TALK'

Despite this, Eggar said, the industry is still seen as part of the problem not part of the solution. "Industry's license to operate is under serious threat," he said.

"We have to act much, much faster and go farther in reducing the carbon footprint. Our energy systems must keep improving at pace, to become cleaner and more efficient and this requires ambitious thinking, capital investment and bold leadership. Action not just talk or more analysis."

He also called on government for more clarity around its policy on carbon capture, usage and storage.

"In partnership with government there needs to be a firm and verifiable plan for industry to develop CCUS. Success could help make the basin carbon negative," he said.

The UK's Minister of State for Business, Energy and Clean Growth, Kwasi Kwarteng, said Thursday the government agreed with Eggar's stance.

"We share the OGA's view that encouraging and supporting the sector to take the steps necessary to minimize carbon emissions will be increasingly important in maintaining investor confidence and the industry's social license to operate," Kwarteng said.

"All parts of our energy system -- and our economy -- need to adapt if we're to reach our goal of eliminating our contribution to climate change by 2050. Our oil and gas industry is no different," Kwarteng said.

Eggar said that maximizing economic recovery of oil and gas from the UKCS "does not need to be in conflict with the transition to net zero."

"They can and should be fully integrated," he said.

INDUSTRY REACTION

In response to the call for action from Eggar, UK industry body OGUK said Thursday that work was already underway. "We are an industry in action," OGUK CEO Deirdre Michie said in a statement.

"We will continue to work closely with all industry regulators including the OGA to deliver a safe, sustainable and competitive industry that realises its full potential in the transition to the low carbon future we all want to see," Michie said.

OGUK has already committed to helping reach net zero emissions and last year published its "Roadmap to 2035: A Blueprint for net zero."

It sets out five key themes requiring industry, government and regulator action "to ensure the sector can continue to provide secure energy supply, support net-zero and remain a vital contributor to the UK economy."

Shell -- whose Aberdeen offices were hit by climate change protests on Thursday -- said it agreed that "urgent action" was needed.

"The heightened awareness of climate change that we have seen over recent months is a good thing," a Shell spokesperson said Thursday.

"What will really accelerate change is effective policy, investment in technology innovation and deployment, and changing customer behavior. As society moves to a lower-carbon future, we are committed to playing our part, by addressing our own emissions and helping customers to reduce theirs -- because we all have a role to play."