September 2023 marks 50 years of Offshore Europe. The oil and gas industry has reason to celebrate that milestone, but how dies that sit today as the energy sector here gears itself towards achieving the UK's ambitious net zero targets?
Since the 1970s, commercial oil has created many careers, opportunities, and livelihoods in the UK, particularly here in the north-east of Scotland, and been important to the growth of the economy, having contributed hundreds of billions of pounds in taxes – circa £360bn in net tax revenues since 1970.
This region has lived and breathed this industry for decades. We have been at the forefront of creating the pioneering and cutting-edge technology required to explore and extract hydrocarbons from even the harshest of environments, such that even some of the oldest fields discovered in the UKCS, like Forties, are still producing. Today, we are on the verge of sanctioning fields that even 10 years ago were thought to be impossible.
The North Sea Transition Authority (NSTA) reported that by the end of 2020, 45.9 billion boe of oil and gas had been produced from the UKCS, and we have one of the safest offshore regimes in the world. All of this is absolutely cause for celebration, notwithstanding he necessary progression towards net zero.
However, achievement of the UK net zero targets is reliant on the establishment of the necessary infrastructure and technology required to produce greener oil and gas and green energy. To ensure a smooth transition, time is required to develop and build economic solutions.
While emissions from North Sea production have decreased by 20% since 2018, which is a significant achievement, the industry is looking for increased government support and intervention in relation to the development of green energy solutions in order to progress more rapidly and reduce the red tape which delays projects. In addition, expanding and acceleration initiatives including the reduction of emissions from domestic properties by means of improved insulation options and the further development of infrastructure for electric vehicles can significantly support the achievement of the UK net zero targets.
Over three quarters of our energy needs are met by oil and gas and even by the mid-2030s, that figure will still be around 50%. The NSTA has estimated that there could still be 10 to 15 billion boe of reserves in the North Sea which presents a challenge and opportunity for the industry under the right circumstances.
While there are examples as to how the green energy industry is developing alongside traditional oil and gas operations, such as the recently announced ACORN carbon capture and storage (CCS) project, issues such as political uncertainty, high taxes and supply chain pressure mean that such investments are being more closely risk assessed and progressing more slowly than they otherwise might have in a more stable energy market.
Projects like ACORN, which utilise existing oil and gas infrastructure or the growing development of green hydrogen, which relies on energy engineering skills and expertise, present huge opportunities for the north-east in terms of job creation and application of the vast knowledge pool we have here.
Domestic oil and gas production remains critical to our present and our future. And while achieving net zero is crucial, the journey to that point requires planning and holistic understanding of what the right domestic energy mix will look like over time. With the right approach, we can all ensure that we secure a strong foothold in that global market for the benefit of our economy and workforces in the longer term.
So, let's celebrate our achievements and look forward to the UK remaining at the forefront of the energy industry as it evolves over the next 50 years.
Clare is head of energy and infrastructure and Rhona is a partner in the oil and gas team at Brodies LLP, both are based in Aberdeen. For more information, or to get in touch, visit brodies.com
The article originally appeared in The Press and Journal on 4th September 2023.
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