I think the expression is “fiddling while Rome burns”
Operators voice investment doubts as NSTA emissions plan published
By Michael Behr
27/03/2024, 12:01 am
The
North Sea Transition Authority (NSTA) has pushed ahead with plans to require developers to electrify their oil and gas assets, with operators voicing concern it could drive away investment.
The NSTA released its OGA Plan today after public consultation and feedback.
Under the strategy, new developments producing oil after 1 January 2030 must be either fully electrified or run on alternative low carbon power with near equivalent emission reductions.
The rules for new developments that will produce oil before 1 January 2030 are slightly looser, as they should be electrification ready when they come online.
In addition, existing assets defined as high emissions intensity assets would need to agree dates to halt production.
A
draft version of the plan was opened to consultation in October, with North Sea operators raising concerns that the draft plan will cause numerous platforms to shut down early, curtailing North Sea oil and gas production.
They added that that replacing diesel or gas generators currently used to power platforms with limited remaining production life, the majority of those in the UK sector, would also be too costly.
However, an industry source told Energy Voice that the language used in the new draft of the OGA Plan around electrification in the new draft indicates that the NTSA will be more open to conversations around electrification.
The plan notes that financial investments must be made to electrify all assets where it is reasonable to do so.
It added that emissions intensity will be used to identify assets to consider if they should agree cessation dates, but it will not be the single determining factor.
“There’s a recognition of the difficulty of electrification,” the source said.
However, they added that the expectation was clearly that all future production will be electrified.
The plan notes that should the decision be taken not to electrify an asset when the NSTA considers it to do so, the body will not approve the project’s field development plan.
Concerns raised on NSTA Plan
Despite this openness, there remain concerns that the electrification plans could drive away investment from the UK North Sea and force existing assets to close early.
Chairman of
BRINDEX Robin Allan said that while the group agrees with the plans goal of reducing greenhouse gas emissions, “the impacts of no new investment are stark”.
“Lower levels of oil and gas production will weaken the UK’s energy security and kill off well paid and skilled jobs in communities which have helped develop UK energy for decades. Similarly, if no new exploration were to take place, the UK would increase its gas supply carbon footprint by, on average, over 1 million tonnes CO2e per year out to 2050.”
In addition, a spokesperson speaking on behalf of
Viaro Energy CEO Francesco Mazzagatti commented that while it had not seen the revisions to the draft plan, “it is difficult to perceive this plan as a strategy that will optimise investment potential and efficiency hand-in-hand with net-zero goals, considering that its principles were set out in isolation from the broader factors impacting the industry’s ability to comply with these demands”.
They said: “For example, the plan outlines the responsibilities of producers, asking them to provide strict deadlines in their field development plans, but no such regulations appear to have been imposed on the regulator itself and the government, which are each in their own right in charge of approvals processes and decisions around licensing rounds.
Viaro added that windfall tax had not been accounted for in the plan, adding uncertainties around returns on investments.
“The NSTA has traditionally been known to take a collaborative approach to influence positive changes in the industry, and the OGA plan remains vague enough in places that we will need to wait and see how it will be enforced in practice before making any definitive judgements.
“We are hopeful that the regulator’s approach will not change so drastically that it will disregard the very real and important matters to address beyond the industry’s obligations alone.”
Moral and legal imperative
The plan was released amid concerns that operators are not going to hit emissions reduction targets for the UK North Sea. The NSTA hailed industry efforts in cutting production emissions by nearly a quarter since 2018 and halving flaring from 2018 to 2022.
However, it noted North Sea oil and gas production still accounts for around 3% of total UK greenhouse gas emissions.
Electrification could, the NTSA said, deliver emissions savings of 1-2 million tonnes in 2030 and up to 22 million tonnes by 2050.
Its potential to drive down emissions has won the OGA plan support.
Wood CEO Ken Gilmartin said: “For us as a company, [the trend towards electrification] is great, because we’re highly specialised and have great subject matter expertise in electrification. We see opportunities there.
“I think some of the concerns from operators is about the affordability, and that return on investment and that just continues to be something that you need to be mindful of.
“From an overarching standpoint, that journey to continued decarbonisation [and] reducing the carbon intensity, not just in the North Sea but across all of the assets that we serve globally, is a consistent recurring theme.”
And Professor John Underhill, Aberdeen University’s Director for Energy Transition added: “There is a moral and legal imperative to reduce emissions, lower the oil and gas industry’s carbon footprint, and meet net zero targets to achieve climate compatibility. So, efforts to decarbonise and reduce industrial emissions are welcome.
“The NSTA’s plan to increase offshore electrification and reduce methane venting and flaring from producing assets will help push down the sector’s carbon footprint making emissions from indigenous supplies far less than those of equivalent oil and liquified natural gas (LNG) imports from Qatar, Algeria and the United States.”
(20min delay)