More than five years ago, the (outgoing) CEO of the former Oil and Gas Authority (now the North Sea Transition Authority), Andy Samuel, and I, always over coffee, enjoyed a series of informal talks about the future potential role of the UK continental shelf in The Great Energy Transition .
In particular, we discussed the role of offshore wind energy and its potential value to the oil and gas industry in providing cheap power to existing fields to expand production and develop new resources, with a focus on the southern gas basin, where Big Wind and Big Oil have been shoulder to shoulder, not always in harmony.
The reality is that this dialogue began less than two years after the UK government launched the UCI in 2015, with its primary purpose being to secure the maximum value of commercially recoverable petroleum from the UKCS.
Led by Andy Samuel, this powerful regulator was exactly what Britain’s offshore oil and gas industry needed, although inevitably the agency didn’t always get it right.
What is particularly interesting is that a systematic conversation with Big Wind was established relatively quickly and, given my own involvement in the Aberdeen Bay project, Samuel was keen to share his thoughts.
Sooner or later, the two industries would have to come together in some way, possibly developing symbiotic relationships and harmonizing labor practices for the common good.
Breaking into the mainstream
Certainly a measure of the value of this early work is the announcement in February this year of Crown Estate Scotland’s proposed offshore wind leasing process Innovation and Targeted Oil and Gas (INTOG).
“We made a small start when we looked at the gas-to-wire option in the southern North Sea in 2018,” says Samuel.
“This turned out to be more interesting than we initially thought, so the decision was made to look at it more broadly. This was the energy integration work, of which there were several phases.
“The first phase was led by the OGA; It was about visions. Not a few might find it interesting, but not more.
“It certainly wasn’t mainstream. But today it absolutely is. The change in just two or three years has been quite extraordinary.”
One of the results was the report “UKCS Energy Integration: interim results“, published on December 17, 2019.
It discussed the first phase of the UK Continental Shelf (UKCS) energy integration project led by OGA. The aim was to consider options to contribute to a new strategic vision of the UKCS as an integrated energy basin.
Andy Samuel admits the oil and gas-wind conversation was difficult at first. It boiled down to this: “We are Big Wind and we are the future; You may be Big Oil, but you are history. How come you have the audacity to come and talk to us?’.
“In the future, we would hold a stakeholder day with my board once a year,” he recalls.
“You can imagine in the early days it was very E&P focused and we would take the board to places like Sullom Voe and talk about gas terminals and stuff like that.
“But our last stakeholder board was in London, where we had key people like Duncan Clark, UK head at Orsted, and senior staff from Ofgem; plus some UKCS directors and investors including lending banks.
“So it was very different. The electrification of offshore plants and security of supply were also important elements of the discussion.
“Basically, we have all the components that are needed to make the North Sea vision of the future a reality. However, it is one thing to have a vision; You need the people who can understand the systemic leadership and level of collaboration to make it really work.”
The future North Sea is reality
Behind these two maritime energy sectors are practically completely different regulatory frameworks, which is why the energy integration work led by the OGA and officially presented by the authority in August 2020 is so important.
Importantly, the OGA could bring an overall UKCS perspective to the table while offshore wind remains less coherent, partly due to the different approach Scotland is taking to the rest of the UK.
“And people respected that,” says Samuel.
“It was also very helpful that we often base our decisions on data and evidence; therefore, assets like the National Data Repository can now be leveraged by these new industries.
“We were able to output a lot of seismic data that offshore wind operators can now use for (initially) some of their shallow water site identification work without having to go out and get new data.”
Of course it helps that many of the people now involved with UK offshore wind energy came from the oil and gas industry and brought with them a tremendous amount of relevant expertise.
“A good example is the INTOG round; a great innovation from the Scottish system that can boost the floating offshore wind industry,” adds Samuel.
Andy Samuel on managing CCS megatons
In fact, Crown Estate Scotland officially opened INTOG to tender last month, with November 18 set as the deadline for applications. The aim of the program is to build wind farms in conjunction with existing and planned oil and gas facilities with the aim of reducing their emissions.
And on the contentious issue of how to seriously cut UK emissions, it has become clear that the oil and gas industry really has a key role to play in the development of large-scale storage of carbon dioxide (CO2) under the North Sea, mainly in depleted hydrocarbon reservoirs ; and that the NSTA has an important role to play in moving this forward.
“I don’t yet see the scale (size of the proposals) needed to get out the megatons we desperately need faster than we can imagine to start addressing the climate emergency.
“But where we can use CCS, we definitely should. However, what started (some time ago) with Phil Hemmens at ENI has now grown into something that 40 industrial users are deeply interested in.”
Samuel was referring to a visit to the HyNet Initiative (Liverpool Bay Area – North West England and North Wales) including site visits with four industry representatives (Hanson UK, Essar Oil UK, Encirc and Viridor) and representatives from Progressive Energy, ENI, BEIS, NSTA, Ofgem, LCC, CCC, local MPs and others on August 2nd.
HyNet North West is based on the production of hydrogen from natural gas. It includes the development of a new hydrogen pipeline; and the creation of the UK’s first CCS infrastructure.
According to Samuel, Jonathan Brearley, CEO of Even Ofgem, has caught the sting and now believes in the criticality of CCS as a way to meet the UK’s emissions reduction commitments.
Andy Samuel is wary of singleing out UK politicians who really understand when it comes to the UK’s energy challenges, but insists the NSTA has been able to work effectively with whomever the Minister or Foreign Secretary is briefing on energy entrusted by No. 10 with each “without exception”
“I think at the moment the foreign minister that we have (Kwasi Kwarteng) was very involved in the North Sea Transitional Agreement, which I think is a very good deal,” says Samuel.
“That’s very much about the new; build very strongly on this vision of a new North Sea and energy integration.”
“There is a consensus that this is the way to go, but affordability is the hard part. Obviously some of the business models out there need public funding to make them work.”
But Samuel warns that the Treasury holds the key to who gets the money, meaning who gets to play.
“Historically we (UK) have been one of the biggest emitters per capita so we have a duty to do this (CCS) you might say. But it’s still a good deal.
“If we get this right, there will be tremendous value added for the UK through the supply chain. There is no doubt about it. But others want to catch up and overtake.”
As the regulator settles into its changed role as the North Sea transitional authority (the restart came in March), it’s tempting to speculate on how it will evolve under the leadership of Samuel’s successor, Stuart Payne, from January next year.
He has been with the agency since 2015 and is currently responsible for the decommissioning, leading the work with the supply chain and leading the human resources function.
UCI to NSTA
But NSTA’s eventual success in confronting Offshore Big Wind will no doubt raise questions about how to ensure a balanced approach to monitoring Britain’s maritime energy supply, whether oil, gas, electricity, hydrogen or even ammonia in the future.
The fact that more and more oil and gas operators are now getting involved in low-carbon energy and are willing to engage with CCS, gas storage expansion and hydrogen is strategically very important.
Originally hired as the UCI’s first CEO due to his oil and gas background, Andy Samuel has clearly made a remarkable personal transformation during his tenure at the helm of what is possibly the most effective UK regulator ever.
But it wasn’t easy to sail.
Getting the North Sea establishment to understand the need for a low-carbon future has not been easy.
“It was bumpy at first; There were many skeptics,” he muses.
“The other thing that was very bumpy was getting the industry to go further than they wanted by signing up (as part of the North Sea Transition Deal) to the 50 per cent cut in UKCS emissions by 2030.
“There was a lot of resistance initially, but I am pleased to say that the industry is fully committed to this and rightfully achieving the UK Climate Change Committee’s 68% target by 2030.
“This in turn makes the electrification of the North Sea extremely important; it will be the game changer.”
But achieving such goals certainly depends on politicians, given how many climate and environment-related promises and commitments have been tossed aside under the Johnson administration, with the clear possibility of a bonfire of commitments under the prime minister on May 5. September is announced because of the recent and absolutely massive crisis, plus the miserable outcome of the COP26 in November?
But Samuel is encouraged.
He recently attended a Johnson-led #10 Ukraine-related Roundtable, at which virtually everyone said they remained committed to Net Zero; that the UK had built momentum and that they were going to see it through.
“That was awesome. I felt a really strong commitment from key players to finish what we started and move forward quickly.”
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