INTERVIEW: UK government must be 'realistic,' says North Sea industry policy head

London — The UK oil and gas industry is ready to take on the challenge of carbon emissions provided it has the support of a government committed to a "realistic" energy policy, Michael Tholen, upstream policy head at industry group Oil & Gas UK, has said in an interview.

A month after an election confirmed the UK on its path out of the EU and allayed fears of windfall taxes and nationalization, Tholen said the new government was giving the right signals, but it was early days. He warned that overly idealistic policy could lead to a "train wreck."

The Conservative Party manifesto committed the government to net-zero carbon emissions by 2050 and it is undertaking a review of energy policy, with detailed plans to be set out in the autumn. This week, government minister for business, energy and clean growth Kwasi Kwarteng stressed the need for the industry to cut emissions to ensure its "social license to operate."

Tholen, speaking before the minister's comments, said: "We're in some very challenging times in that the UK economy is trying to work out what it's about as we go through Brexit and we also face climate change challenges."

"The challenge for the government is to try and work out what are the things to cling on to as it looks to navigate 2020 and beyond."

Norway and the UK's oil and gas industries are looking to cut emissions generated in offshore operations and link their facilities with power sources such as wind farms, as well as developing plans to pump carbon dioxide into depleted fields.

Tholen highlighted these efforts, but said the UK faced more formidable challenges than Norway.

UK offshore platforms account for more than 5% of the country's power demand and 10% of power plant emissions, partly due to the use of diesel to power ageing facilities in remote locations, according to the Oil & Gas Authority. Norway's new Johan Sverdrup facilities have been a catalyst for bringing hydropower generated in the country's fjords to offshore platforms.

Tholen said the future was one of integrating multiple energy sources, including oil and gas, wind and wave power.

The future "is going to be as much about maximizing the energy potential offshore. The energy isn't just the hydrocarbons below ground, [it's] the wind power way above ground, you've got the wave power as well. The energy available -- and maybe one day tidal barrages -- is abundant, and we've got to find a way of mixing" those, he said.

The oil and gas industry is "expected [by government] to be doing some different things, and we've got that and are all working hard on that."

"By all means set high expectations of us, we will meet them, but you need to plan for us to be part of the future. Realistic planning is healthy, idealistic planning frankly can lead to a train wreck," he said.

Tholen said the upstream industry in places like Aberdeen should be able to market accumulated skills in reducing emissions. But he added that recent protests in which activists boarded Shell's Brent facilities and rigs working for BP had not helped.

"Nipping at our heels is fine, but please look and see what is being achieved and recognize that we are trying our best to be part of the solution," he said of the Extinction Rebellion and Greenpeace protests. "There is no easy solution to the fact we need oil and gas for many years ahead of us."

IPO prospects

Tholen echoed expectations that some privately owned UK oil and gas companies may list on the London Stock Exchange, creating closer ties with the UK economy and society. He highlighted private equity-backed Neptune Energy and its work on carbon capture and storage in the Dutch North Sea as an example of a private company looking to respond to climate concerns.

"The companies I'm thinking of are actively looking at how they both reduce their own emissions and play a part in that future, where the people using their products use them in an increasingly low, and then no-carbon way."

In terms of future oil and gas output, Tholen reiterated OGUK's view of likely decline from around next year, noting it would take time to bring some major new projects on stream.

He voiced confidence, however, in some big projects penciled in for development, including Cambo, a project led by Siccar Point Energy, and Rosebank, a long-delayed project taken over by Norway's Equinor last year.

"Cambo's on the move certainly, but Rosebank -- there's a lot of work still to do to get that one across the line," Tholen said, describing the Rosebank geology as "desperately difficult."

"There's not a plethora of new things coming on. If not a tipping point, we're back to things being at best pretty steady over the next couple of years, with maybe two years out more downside than upside."