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Targets 50% emission reduction by 2030, 90% by 2040

Low-carbon electrification projects face major challenge

Shell says targets will 'galvanize' industry's transition effort

London — The UK's upstream industry body Oil & Gas UK committed June 16 to halving the sector's greenhouse gas emissions by 2030 and to a 90% reduction by 2040, as it begins talks with the government on measures to mitigate the impact on the industry of recent market turmoil.

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Outlining the new goals, intended to fend off environmental criticism and align the oil and gas sector with the UK's goal of net zero emissions by 2050, OGUK emphasized the blow inflicted by the coronavirus and collapsing oil prices.

The upheaval, it said, had been particularly severe for supply chain companies, seen by the industry as in need of government help -- or a "sector deal" -- to stay in existence, as upstream operators curb spending on new projects. OGUK has warned up to 30,000 jobs could be lost in the sector due to the latest downturn.

Coronavirus and low commodity prices "have had a devastating impact on the UK's offshore oil and gas industry. Given the limited impact that the severity of the lockdown has had on global emissions, it's clearer than ever that we need a fair, inclusive and sustainable transition toward climate targets," OGUK CEO Deirdre Michie said.

Oil & Gas UK's climate goals do not cover the emissions resulting from the consumption of UK oil and gas, but from the process of oil and gas production in the North Sea, including generation of power and heat at offshore platforms, and the "flaring," or burning off of gas, for safety or technical reasons. It estimates these upstream emissions at 4% of the UK's total greenhouse gas emissions, with power generated at offshore platforms being four to five times more CO2-intensive than energy from the national grid.

OGUK reiterated, however, that allowing the sector to die for the sake of reducing emissions would mean greater reliance on imported fuel, with potentially higher associated emissions.

It argues the industry can contribute to innovations such as carbon capture and storage and the use of hydrogen fuels, and in the longer term can take its power from renewable sources.

Shell voiced its support for the new targets. "The industry's set itself a clear and challenging goal to align with the UK's net zero targets. It should galvanize efforts across the sector, and increase the speed of change in UK energy, while maintaining security of supply," Shell's UK and Ireland upstream director, Steve Phimister, said.

"Emissions from operations will be reduced while the industry, government and regulators work to develop bold projects...that will help society decarbonize and reach net zero."

OGUK called for government support, particularly for the supply chain. Scotland's devolved government made its own pledge of a GBP62 million ($78 million) "energy transition fund" on June 12.

"We need a green recovery which supports jobs, supply chain companies and energy communities," Michie said.

It issued an accompanying statement from the UK government's minister for business, energy and clean growth, Kwasi Kwarteng, reiterating his support, but without specific pledges. "The offshore oil and gas sector's commitment to halving operational emissions over the next decade is a welcome step for an industry that has a vital role to play in our energy transition in the years to come," he said.

The government "will continue to work tirelessly with all partners to deliver a dynamic sector deal," he added.

OGUK acknowledged the scale of the challenge in cutting the industry's carbon emissions, which it estimated at 18.3 million mt of CO2 equivalent in 2018.

While UK oil and gas production is seen as being in long-term decline, the country's oil output has recovered in the last half-decade, exceeding 1.1 million b/d. "Natural" production decline would only cut the industry's emissions by around 6% over the next five years, with efficiency gains able to bring modest additional reductions, OGUK said.

It also noted a need to improve the measurement of the sector's CO2 emissions, 60% of which come from power generation at offshore facilities. The group estimates 1.2 million mt of gas was burnt off, or "flared," in 2018, along with another 95,000 mt released, or "vented," directly into the atmosphere.

Renewable projects

More substantial efforts such as bringing renewable power to oil and gas platforms -- as happens in Norway -- would be costly and face a number of obstacles, OGUK said.

A number of proposals have been made for supplying renewable power to oil and gas platforms, either from the UK or Norwegian grids, or from offshore sources such as floating wind farms.

However, "the technology, offshore renewable resources and infrastructure are not currently in place to facilitate such offshore electrification of either existing or new assets," and such projects were likely to take a decade to implement "at scale", requiring significant investment and regulatory improvement, OGUK said.

A separate contract-for-difference pricing mechanism might be needed for floating wind power generation, particularly to bring renewable power to platforms in the remote West of Shetland area, Louise O'Hara Murray, OGUK's environmental manager, added.

"Electrification is a challenge in all parts of the UK continental shelf ... a challenge converting brownfield assets and it will be a challenge for putting new assets out there as well," she told journalists.

"West of Shetland is an important area for future production. It's got lots of new, very efficient assets there at the moment, and lots of potential for electrification, but it is costly."