UK becomes first G7 country to support oil and gas industry energy transition with North Sea Deal

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High-skilled oil and gas workers and the supply chain ‘will not be left behind in transition to low carbon future’ as North Sea Transition Deal is agreed between the UK government and the industry.

The sector deal is set to support workers, businesses, and the supply chain through this transition by harnessing the industry’s existing capabilities, infrastructure and private investment potential to exploit new and emerging technologies such as hydrogen production, Carbon Capture Usage and Storage, offshore wind and decommissioning.

Through the Deal, the oil and gas sector, largely based in Scotland and the North East, government and trade unions will work together over the next decade and beyond to deliver the skills, innovation and new infrastructure required to decarbonise North Sea production.

Chief Executive of Oil & Gas UK, Deirdre Michie, commented on the announcement: “The North Sea Transition Deal is a transformative partnership which will harness the expertise of the UK offshore oil and gas industry to urgently meet the country’s climate ambitions of net zero emissions by 2050.

“It will unlock billions of pounds of investment and see government and industry work together to deliver a homegrown energy transition, realising innovative low carbon solutions that can be exported globally.

“The Deal will safeguard UK energy security, providing affordable energy to millions of households, secure tens of thousands of jobs in industrial heartlands across the country and support the UK economy.

“It is the first deal of its kind by any G7 country and a striking example of the UK showing global leadership on climate change ahead of COP26.”

Not only does the Deal seek to support existing companies to decarbonise in preparation for a net zero future by 2050, but it will also create the right business environment to attract new industrial sectors to base themselves in the UK, develop new export opportunities for British business, and secure new high-value jobs for the long-term.

Extracting oil and gas on the UK Continental Shelf is directly responsible for around 3.5% of the UK’s greenhouse gas emissions.

Through the package of measures, the Deal is expected to cut pollution by up to 60 million tonnes by 2030 including 15 million tonnes from oil and gas production on the UK Continental Shelf – the equivalent of annual emissions from 90% of the UK’s homes – while supporting up to 40,000 jobs across the supply chain.

Key commitments in the North Sea Transition Deal include:

  • The sector setting early targets to reduce emissions by 10% by 2025 and 25% by 2027 and has committed to cut emissions by 50% by 2030
  • Joint government and oil and gas sector investment of up to £16 billion by 2030 to reduce carbon emissions. This includes up to £3 billion to replace fossil fuel-based power supplies on oil and gas platforms with renewable energy, up to £3 billion on Carbon Capture Usage and Storage, and up to £10 billion for hydrogen production
  • By 2030, the sector will voluntarily commit to ensuring that 50% of its offshore decommissioning and new energy technology projects will be provided by local businesses, helping to anchor jobs to the UK
  • The appointment of an Industry Supply Chain Champion who will support the coordination of local growth and job opportunities with other sectors, such as Carbon Capture Usage and Storage and offshore wind

According to the government, an orderly transition is crucial to maintaining the UK’s energy security of supply, supporting high-value jobs, and safeguarding the expertise necessary to achieve a lower carbon future.

The UK government will therefore introduce a new Climate Compatibility Checkpoint before each future oil and gas licensing round to ensure licences awarded are aligned with wider climate objectives, including net-zero emissions by 2050, and the UK’s diverse energy supply.

This Checkpoint will use the latest evidence, looking at domestic demand for oil and gas, the sector’s projected production levels, the increasing prevalence of clean technologies such as offshore wind and carbon capture, and the sector’s continued progress against its ambitious emissions reduction targets.

The UK government believes it is vital that any future licenses are granted to industry only on the basis that they are compatible with the UK’s climate change objectives.

A dynamic checkpoint enables the assessment of ongoing domestic need for oil and gas, while expecting concrete action from the sector on decarbonisation.

If the evidence suggests that a future licensing round would undermine the UK’s climate goals or delivery of Net Zero, it will not go ahead.

The UK government will design and implement the checkpoint by the end of 2021 through extensive engagement with a wide range of stakeholders.

In a further move to support the shift to green technology and renewable energy in the UK and around the world, the UK government has announced it will no longer provide support for the fossil fuel energy sector overseas from 31 March 2021.

This follows the Prime Minister’s commitment to end taxpayer support for fossil fuels projects overseas as soon as possible at the Climate Ambition Summit last December and the decision on the date to end this comes after consultation with industry.

This will include UK Export Finance support, international aid funding, and trade promotion for new crude oil, natural gas and thermal coal projects – with very limited exceptions.

Oil and gas is still vital to the production of many everyday essentials like medicines, plastics, cosmetics and household appliances – this is likely to remain the case over the coming decades as the UK transitions to low carbon solutions.

The government’s independent Committee on Climate Change recognises the ongoing demand for oil and natural gas, including it in all scenarios for how the UK meets its target for achieving net zero emissions by 2050.

More information about the North Sea Transition Deal is available on the government website.