INTERVIEW: All undeveloped North Sea projects should face environmental review: Scottish minister

All potential North Sea oil and gas projects and existing exploration licenses should face a new environmental review before going ahead, Scotland's Just Transition Minister Richard Lochhead has told S&P Global Platts on the eve of COP26 climate talks.

His comments go well beyond recent environmental moves by the London government, which is reviewing the licensing system to make it compatible with the UK's net-zero 2050 target.

Lochhead said there remained a role for oil and gas development in Scotland, but it must be compatible with a Scottish target of net-zero by 2045, five years earlier than the official UK target of Prime Minister Boris Johnson. In attempt at reassurance, Lochhead said: "There is no pulling the plug on any industry, and there's no cliff edge."

The Cambo field is one project that would face a review under the terms outlined by Lochhead, and has already been highlighted by Scottish First Minister Nicola Sturgeon. However, Lochhead said the same criteria should also apply to other projects waiting in the wings. These would potentially include Norwegian company Equinor's 300 million-barrel Rosebank field, Jersey Oil & Gas' 172 million-barrel Greater Buchan Area, and heavy oil projects like EnQuest's Bentley.

"We said to the UK government that just as they have agreed to carry out a climate change check on new [exploration] licenses they should also adopt the same principle for fields that are not already in production, even if they have a license," Lochhead said, adding this would ensure compatibility with Scotland's 2045 net-zero target.

Sturgeon's intervention has already raised the stakes for the oil and gas sector, with critics arguing the UK is being equivocal on the future it sees for the industry. A number of fields, such as BP's Clair in the West of Shetland area, are expected to be producing through the 2040s or beyond.

The Cambo license was granted in 2001 and the development, backed by independent Siccar Point Energy and Shell, is awaiting approval, though this is thought unlikely until after COP26.

Sturgeon said in August that Cambo, the UK's largest oil field awaiting approval, should be reassessed on environmental grounds. Johnson by contrast has said existing licenses cannot be torn up.

It is unclear what a review would mean for existing activity in the North Sea or how this is to be aligned with Scotland's 2045 target. Oil and Gas UK has said hydrocarbons will continue to be part of "a low carbon energy mix" under a Transition Deal agreed in March 2021.

Since August Scotland's SNP government has been in a coalition with the Green party, needed for it to secure a majority in the devolved Edinburgh parliament, prompting a toughening of the leadership's environmental rhetoric.

Scotland will provide the venue for the United Nations Climate Change conference in Glasgow in November, which the UK and UN are formally hosting. Scotland is keen to play a role too, Lochhead said.

Industry engagement

In a nod to the industry, Lochhead said there were encouraging signs the oil and gas majors will help drive the energy transition.

Different energy majors have presented different timescales and deadlines and these include 2030, 2040 and 2050, Lochhead said. "Overtime we'd like to see that turned into real projects," he said.

Scotland has seen an expansion of onshore wind in recent years and around 97% of its domestic electricity consumption comes from renewable sources, he said.

He said there were skills the oil and gas industry could transfer to the renewables sector and offshore hydrocarbon infrastructure could be harnessed for wind and tide power.

"Many of the companies we've been speaking to are now investing in... clean energy and low-carbon technologies, who are traditionally fossil fuel companies," he said. "They themselves are leading the way in shifting and that's also been a welcome development."

The UK produces around 1 million b/d of oil across the North Sea and West of Shetland area -- a little over a third of peak levels in the late-20th century -- and meets around half the country's gas needs.

S&P Global Platts Analytics expects UK oil production to fall more than 40% in the next decade, from around 930,000 b/d this year.

The industry makes a relatively small contribution in direct taxation of upstream production, estimated at just GBP300 million ($412 million) for the current tax year.

Acorn fury

The UK government on Oct. 19 unveiled financial backing for two carbon capture and storage projects intended to curb emissions from the North of England, but infuriated Scottish authorities by sidelining the long-standing Acorn carbon capture project, which was seen as promising a greener future for the sector. Acorn, which is backed by Shell and London-listed Harbour Energy, was left as a "reserve" project.

"It was the one that was the ideal candidate," Lochhead said. "They're saying what's required in terms of carbon capture to achieve our 2045, or in their case, 2050 net-zero targets requires more than one project to get to go ahead quickly, and therefore there's a cast iron case as to why the Scottish Acorn project should have been included in Track-1."

"With independence of course, we wouldn't have a situation where we were being held back by, for instance, not giving support to the Scottish Acorn project for carbon capture and storage, which will play a crucial part in achieving our targets," Lochhead said.