Spending on projects in the UK North Sea is projected to exceed £ 20 billion over the next five years, according to a flagship study.
And, according to the Oil and Gas UK (OGUK) annual economic report, these investments are expected to release around 2.7 billion barrels of oil equivalent (boe) from the UK continental shelf (UKCS).
And this despite increasing demands on Westminster to cut oil and gas production in the North Sea in order to combat climate change.
OGUK’s report was released amid an ongoing debate on the future of the industry, which primarily revolves around the proposed Cambo field west of the Shetland Islands.
Politicians and environmental groups are calling for the British government to block Siccar Point Energy and Shell’s North Sea development.
But OGUK says its report, which found UK gas imports hit record highs in the winter of 2021, “shows the reality” that domestic production will cease.
According to the study, between January and March this year, the UK had to source 56% of the gas used to heat homes and run power plants from foreign sources.
The trade authority attributed the deficit to an increase in demand as well as a decrease in production, partly due to Covid-19 and partly due to long-term declines.
The report also found that overall the UK still gets 73% of its total energy from oil and gas – UKCS production accounts for about 70% of that.
In addition, the industry is expected to contribute around £ 1.7bn to the UK Treasury by 2026, building on the £ 360bn.
Deirdre Michie, General Manager of the Trade Association said: “Oil and gas provided nearly three-quarters of the UK’s total energy last year and we will continue to rely on them to heat our homes, keep our lights on and many of our everyday necessities Medicines from cell phones to road surfaces. About 85% of UK households are still heated with gas, but imported gas hit a record high last year. “
Looking at the year to date, OGUK confirmed that the oil price averages £ 48.52 per barrel.
Oil and gas production at UKCS was one million boe per day in the first quarter of 2021, a decrease of around 11% from the corresponding period in 2020.
And this year a total of 39 holes have been drilled to date, most of which are in development, with three exploration holes and two evaluation holes.
Not only are oil and gas a significant part of current demand, but they are also expected to cover roughly half of Britain’s energy consumption by 2050, OGUK said.
To meet these requirements, the report stressed that investing in the UKCS will be critical.
Despite the challenges posed by Covid and the downturn in the sector, £ 3.7 billion was spent in the UK North Sea in 2020.
Over the next five years, the oil and gas industry is expected to invest £ 21 billion in exploration and production of UK oil and gas – a quarter of that will be invested in greenfield projects.
Around £ 6.6bn has already been fully committed by companies, with £ 14.5bn in spending not yet to be sanctioned.
But if this is curtailed, domestic production could only meet a third of the UK’s future energy needs, making the country more reliant on imports.
The report said: “In a case of no further investment, total capital investments could fall to less than £ 1 billion a year by the middle of the decade as Britain increases its reliance on imported fossil fuels.”
OGUK also highlighted the importance of ongoing investment in maintaining a skilled energy workforce capable of meeting the demands of transition.
As things stand, the oil and gas sector is expected to support nearly 200,000 UK jobs in 2021, after shedding more than 30,000 last year.
Of these 200,000 positions, 26,900 are direct, 91,500 indirect and 77,500 induced.
Francesca Bell, OGUK’s Senior Investor Relations Advisor, said, “These 200,000 came from a recent report by Robert Gordon University and it is likely that we will need that number in 2030.
“The important point to emphasize is that these roles are still needed and it is important that we continue to have the people and skills in UKCS during the managed transition to embrace the low carbon journey and achieve net zero . “Technologies from the ground. The workforce will be crucial in unlocking this. “
Industry and Westminster are putting much of their hopes for a just transition on the groundbreaking North Sea Transition Treaty, approved earlier this year.
It aims to balance ongoing efforts to maintain security of energy supply with the need to move towards a low-carbon future.
The agreement, the first of its kind by a G7 country, is expected to add up to $ 16 billion in additional investment over the coming years.
A recent study published by OGUK found that oil and gas support more than 60,000 jobs in the northeast and the region is worth $ 18 billion.
Ms. Michie added, “We all know that a change is needed, so how quickly do we make that change? This report shows the reality that if we shut down domestic oil and gas production sooner than we can reduce demand, there is a risk that we will become increasingly dependent on other countries, which often cause higher emissions.
“Reducing our greenhouse gas emissions won’t be easy, but we’ll do it faster if we support the companies and people who have the skills to get us there. From energy workers to energy consumers, we all need an orderly and fair transition that benefits everyone.
“While the UK continues to use oil and gas, we should make the most of the resources we produce here. The North Sea Transitional Agreement reduces the need for imported energy, makes us more responsible for our own emissions and supports British companies and people who are already investing in clean energy. “
Despite the arguments presented in the report about the potential impact of curbing North Sea production, it is unlikely that much of the opposition to Cambo and oil and gas in general can be suppressed.
With the groundbreaking COP26 climate conference set to take place in Glasgow in the not too distant future, many are calling for decisive and immediate action to tackle climate change.
Mike Tholen, OGUK Sustainability Director, said: “In the run-up to COP26 and with a focus on decarbonisation, it is clearly right to take a look at what our industry is doing.
“We should be proud to tell the story of what Cambo can do to meet the UK’s energy needs and how we can make these barrels low carbon.
“We are confident it can deliver in a way that actually supports the UK’s future energy economy.”
In response to the economic report, David Duguid, Conservative MP from Banff and Buchan, targeted the Scottish Greens.
The party, which recently signed a groundbreaking electricity-sharing agreement with the SNP, did not shy away from stopping its North Sea production.
Senior industry officials have previously raised concerns that the political deal could jeopardize future investments in the basin.
Mr Duguid, who met with representatives from OGUK earlier this month, said: “This report highlights that North Sea oil and gas are still a central pillar of our daily lives, supporting 200,000 jobs across the UK.
“As part of our move to net zero, the North Sea Transitional Agreement underscores the UK Government’s commitment to safeguarding and creating high quality jobs in the North East while stimulating the economy.
“In contrast, the Greens want to turn off the switch and shut down the sector completely, which would be catastrophic for our region.
“While there is still a demand, we must not give up the oil and gas industry if it continues to be central to the whole of Scotland.”
Mark Ruskell, the Green’s climate spokesman, said: “The conclusions of this report directly contradict what the UK Climate Change Committee said to the MSPs in Parliament on Tuesday. Lord Deben made it clear that we need to look at the world’s supplies and see that increasing extraction would help. It is time for people like David Duguid to start listening to the UK government’s own climate advisors rather than contradicting them.
“The UK government ignores science and only listens to the oil and gas industry. The cooperation agreement between the Scottish Greens and the Scottish Government is far from turning the switch off, but rather securing a transitional fund for the North East and a massive expansion of renewable energies so that alternative jobs can be created. This is how we secure a sustainable future and our survival. “
recommended for you