On 6 August 2020, following extensive consultation, the UK Oil and Gas Authority (OGA) published a report "UKCS Energy Integration". The report considers how the OGA can support the UK's commitment to reduce carbon emissions and achieve a transition to net zero by 2050.
The report concludes that the UK offshore oil and gas industry can contribute up to 60% of the overall requirement for UK carbon emissions reductions, through:
- Electrifying offshore oil and gas production: in 2018 offshore platforms and associated infrastructure required 21TW of power, generated by gas or diesel, equivalent to the entire annual domestic electricity consumption of Wales. This should be replaced by electricity from renewable energy
- Using existing offshore infrastructure and the supply chain to support the development of further renewable energy generation. The primary focus will continue to be offshore wind, potentially including floating offshore wind platforms, and also extend to tidal and wave power
- Using depleted oil and gas fields for the development of carbon capture and storage basins: the UK has around 78Gt of potential storage space, sufficient for several hundred years of capacity, and should develop at least 20 individual CO2 storage facilities offshore by 2050 (with at least 3 commercial projects completed by 2030)
- Developing the hydrogen economy, utilising:
- natural gas extracted from UK waters to produce "blue" hydrogen (via methane steam reforming technology), with such projects to be situated in clusters alongside carbon capture and storage
- the additional electricity generated from new offshore wind to produce "green hydrogen" (via water electrolysis). The report highlights that this technology in particular requires additional investment to reduce production costs
- Combining all of the above with the development (and expansion) of UK regional energy transition hubs and onshore net-zero clusters.
The report then looks at how integration can be supported by the OGA and other market participants, including BEIS (the UK ministerial department), Ofgem (the UK gas and electricity regulator) and the Crown Estate. The three key areas of focus are on:
- enhanced regulatory coordination and development
- promoting data consolidation, analytics and availability, and
- supporting the current set of pioneering demonstration projects - such as the HyNet project in Liverpool bay, that plans to bring together blue hydrogen production with carbon capture and storage into depleted offshore gas fields.
The report is a welcome step in the energy transition context. It is inevitably high level, will require significant collaboration between regulators and the private sector, and significant investment in several nascent technologies. However, it is also a realistic assessment: the UK must transition to net zero, but whilst it does so, oil and gas will remain a crucial part of the UK's energy mix. The UK must harness the industry's knowledge, infrastructure and development capital to work in partnership towards net zero.
We also look forward to industry-wide guidance on UK energy transition in the Energy White Paper, which (following several delays) is currently scheduled for publication alongside the 2020 autumn budget statement.