Oil and Gas Authority Chairman Tim Eggar Insists Continuing North Sea Exploration Is Vital

25th November 2021

Exploration and production of oil and gas from the North Sea is still needed if the UK is to meet its energy needs, while ensuring a successful energy transition to net zero, the Chairman of the Oil and Gas Authority, Tim Eggar, has said on Wednesday 24 November 2021.

Speaking to delegates at the combined PROSPEX and PETEX conference in London, Mr Eggar said:"Oil and gas currently provide around three quarters of total UK energy consumption. All forecasts, including the independent Climate Change Committee - point to them being required for heat, power and transportation for the foreseeable future.

"If we need to be reminded of their importance to daily life, we only have to look back a matter of weeks, when we saw long queues at petrol stations and a gas crisis which brought the prospect of higher gas bills for millions of consumers. Security of supply is back in vogue - not before time.

"Our own analyses show domestic gas production has less than half the carbon footprint of imported LNG. In fact, we can produce gas with a lower carbon footprint than almost all other producing countries. So it really makes no sense to be more reliant than we need to be on imports - particularly from countries with less to no commitment to reducing their emissions."

With industry's commitment in the North Sea Transition Deal to half emissions by 2030 and be a fully net zero basin by 2050, Mr Eggar told delegates that industry must do much more to ensure it lowers its carbon footprint and exceed these targets: "Industry's social licence to operate is barely holding. Failure to deliver the transition deal is not an option....These emissions targets should be viewed as the absolute minimum. Industry should look to smash these targets, not just meet them.."

He explained that the OGA would continue to "hold industry to account on their side of the bargain by very closely tracking, monitoring and reporting on progress."

He finished by outlining what he described as a bright future for the highly skilled geosciences community, who would be needed to help ramp up vital carbon capture and storage solutions to scale.

He stated: "We're blessed with world class CO2 storage potential here in the UK. This is our chance to be world leading...There is a tremendous opportunity to meet not just the UK's requirements for carbon removal, but to support the storage of carbon dioxide from the rest of Europe. The success of CCS is going to depend on you - people who understand the rocks, understand the infrastructure, understand the risks and opportunities."

THE SPEECH
t's a particular pleasure to be here in person to talk to you all today.

I want to start by thanking you for the incredible resilience and determination that the exploration community has shown over the past years. Of course there has been the chaos and challenges of Covid but many of you have been through numerous commodity price downturns when exploration is all too often seen as discretionary spend. Most recently your whole existence is being called into question by a vociferous lobby. Some of whom wish to see an abrupt end to UK oil and gas production. They seem to be unaware of the consequences. Such an act would mean that net zero would be unachievable and a just transition a dream.

Even new field developments here in the UK - once celebrated for their value and contribution to the country - face much more challenge, even though the seven new gas fields coming onstream this year will enhance the UKs supply security through prolonging domestic gas production.

But you're all still here! And in the new net zero world you will be just as essential as you have always been.

The energy debate is becoming more polarised than ever. One could not blame the exploration community for feeling under-valued and unheard.

So, I would like to make it clear how I see the future of oil and gas here in the UK.

The facts speak for themselves. Oil and gas currently provide around three quarters of total UK energy consumption. All forecasts, including the independent Climate Change Committee - point to them being required for heat, power and transportation for the foreseeable future.

If we need to be reminded of their importance to daily life, we only have look back a matter of weeks, when we saw long queues at petrol stations and a gas crisis which brought the prospect of higher gas bills for millions of consumers. Security of supply is back in vogue - not before time.

So, let's look at gas more closely for a moment. For both oil and gas, we're producing more each year than we replace with new finds. All forecasts point to us being a net importer out to around 2050.

Given we know we need it, and we know we have it, I say there's a strong case for continuing domestic exploration and production.

There's huge incremental value for the country and for lowering carbon intensity to be made from near-field exploration and tie backs to existing infrastructure. You don't need me to tell you that!

To date this year, a handful of gas or condensate fields have come onstream, with some due later in the year and others in the first half of next year. I think the country should be very thankful for that, bringing as it does more security of supply and lower carbon emissions than imports.

Our own analyses show domestic gas production has less than half the carbon footprint of imported LNG. In fact, we can produce gas with a lower carbon footprint than almost all other producing countries.

So it really makes no sense to be more reliant than we need to be on imports - particularly from countries with less to no commitment to reducing their emissions.

Natural gas has much wider uses. The Hynet project - just one of many ingenious integrated energy projects across the UK - sees gas play an essential role as a feedstock for blue hydrogen production - that, if successful, will help decarbonise industry, transport and domestic heating.

Blue hydrogen production at scale will in turn help ramp up essentials like carbon capture and storage. A demand for hydrogen should lead to green hydrogen and more floating offshore wind.

Gas must be seen therefore for all its benefits as a transition fuel of strategic national importance: the bridge from fossil fuels to net zero.

That's why right now, continued investment is essential to keep the lights on and keep the country moving.

The opposite would simply widen the supply-demand gap and force prices even higher for consumers.

The OGA understands the importance of this and we value all the tremendous work you do.

BUT, and it is a huge "but" there is a climate emergency. Our dependence on fossil fuels must be reduced and we must produce our oil and gas much, much cleaner.

That's why it's important to ensure a positive future for this industry and for the people who work in it.

In the North Sea Transition Deal, the first of its kind in the world, there is recognition of the role of industry now and in the future to supply the energy we need day to day and leading the game changing energy transition opportunities like hydrogen and CCS, which will be essential to get us to net zero.

There's commitment to £16bn of new investment - from both government and industry: including for electrification, CCS and hydrogen.

Explorers have a key role to play in CCS, and potentially also hydrogen storage, but we must also account for the indirect benefits of exploration. A new discovery tied-back to an existing field may play a critical role in sustaining hub-life, improving economics, and justifying the additional investment in, for example, emission reducing electrification.

There is also a commitment in the Deal to support the workforce, people and skills, including valuable training initiatives such as the GeoNetZero Centre for Doctoral Training, which will provide skilled subsurface professionals for the decades ahead.

But there is a quid pro quo. Industry has committed to a series of short, mid and long-term targets to drive down emissions to achieve cleaner production: 10% by 2025; 25% by 2027; 50% by 2030; and a fully net zero basin by 2050.

The OGA’s role is to independently hold industry to account on their side of the bargain by very closely tracking, monitoring and reporting on progress.

I’ve said it so many times before but it bears repeating. Industry’s social licence to operate is barely holding. Failure to deliver the transition deal is not an option.

The progress is good so far. These emissions targets should be viewed as the absolute minimum. Industry should look to smash these targets, not just meet them, and demonstrate that our commitments are not just "blah, blah, blah".

The government’s Net Zero Strategy confirms the OGA in its role as an emissions regulator in the net zero space.

It also recognises that while we need to reduce our dependence on fossil fuels as swiftly as possible - and domestic oil and gas production will contract significantly as the UKCS matures - there is a continued role for oil and gas on the way to net zero.

The government is clear, it’s there in black and white: the North Sea basin has a key role to play, as investment pivots to new opportunities such as CCS and hydrogen, accelerated by widespread electrification.

It reiterates the government’s commitment to working with the oil and gas sector to transform the UKCS into a net zero basin.

But what does all that mean?

The OGA has been on our own net zero journey for some years now. Our revised OGA Strategy, laid before parliament earlier this year, put net zero considerations alongside economic recovery.

The OGA’s role is to continue to regulate the oil and gas sector in a way that minimises greenhouse gas emissions, through our revised OGA Strategy.

The range of net zero obligations on industry, combined with the suite of levers available to the OGA, means net zero is a key factor in our decision making.

This includes: consent for projects; our assessments of operators’ plans to reduce their emissions levels, including at the point of licence application; and how we use full societal carbon cost assessments in our approvals processes.

It also means being firm on our approach to flaring and venting, in line with the World Bank’s Zero Routine Flaring by 2030 initiative.

But despite the assurances of the North Sea Transition Deal and the Net Zero Strategy, perhaps the big question on many people’s minds, particularly in this room, is "what about the next licensing round?"

The detail of the climate compatibility checkpoint, announced in the Deal, will provide more clarity on what future licensing will look like. We expect the government to publish the consultation document on the check point shortly.

Let’s be clear, there is no current ban on exploration and licensing. While we await further news from the government on this - the OGA will be ready to go with a new look licensing round, if that is the way forward decided by government after the consultation.

The industry has clearly articulated its need for continued licensing. We need you to be ready when the opportunity comes. The industry must demonstrate its appetite for new investment alongside its commitment to the transition. In anticipation, I urge you not to waste this pause, but to use it to prepare more robust bids than ever before.

We are confident that, with all the checks and balances and net zero scrutiny that we apply, throughout the lifecycle, we are now in a good position to continue delivering huge value to the UK plc and to industry, fully in line with our enhanced environmental obligations.

The UKCS is an incredible asset. We believe the basin can contribute 60% of the UK’s total carbon reduction requirements. Around 30% of that is from electrification, CCS and hydrogen and 30% from offshore wind expansion.

The success or failure of CCS is fundamental to whether or not we as a country get to net zero. Arguably it’s the one of the most important contributors that this industry - and all of you - can help make a reality.

The Climate Change Committee have rightly said it’s essential to meeting net zero.

We’re blessed with world class CO2 storage potential here in the UK. This is our chance to be world leading.

We’re seeing lots of interest from industry and a rise in activity in terms of carbon storage licence applications coming through. The government has announced the results of the CCS competition but many more projects will be needed.

We’ve been using our geological and spatial planning expertise to map out the areas with the greatest CCS potential and are working with other government bodies to preserve them in what is an increasingly crowded basin.

We’re looking at: the rocks; the subsurface potential; the play fairways; the current and future areas and how they interplay with other users such as wind.

Together we need to build this portfolio of opportunity, collaboratively mapping out the future of CCS projects as we see them against the CCC’s Carbon Budget 6 balanced pathway.

We believe there are enough projects on our radar now to get ourselves firmly onto this pathway. There is a tremendous opportunity to meet not just the UK’s requirements for carbon removal, but to support the storage of carbon dioxide from the rest of Europe.

The success of CCS is going to depend on you - people who understand the rocks, understand the infrastructure, understand the risks and opportunities.

So, to conclude, I really believe your future is bright. The UK needs the industry to keep investing in this basin. With government, the OGA and industry working together, I am confident that we can make the UKCS one of the most exciting diverse and environmentally friendly basins in the world.

An exciting new chapter for the North Sea is well underway and you are all very much needed to ensure its success.

Thank you.