OGV Energy's UK North Sea Energy Review November 2021

The opportunities and challenges of the energy transition, the UK’s energy security amid surging natural gas prices, and updates on drilling and development projects featured in the North Sea oil and gas news flow in the past month.

The leading association of the offshore industry, OGUK, published its Energy Transition Outlook 2021 in October, which showed that direct emissions from the UK oil and gas sector are being driven down with a 2 million tonne cut in emissions during 2020, of which OGUK estimates that around half can be attributed to operators’ actions.

While production in 2020 fell 5%, mostly due to the impacts of COVID-19 on production and activity, emissions fell by 10%, OGUK said. The emissions reduction was expected due to the decline in activity.

Yet, compared with previous years, emissions declined significantly further than would have been expected from the reduced activity and associated decline in production, the association noted. Operators are beginning to realise near-term emissions reduction through continuous improvements, including reduced flaring and venting, streamlining operations, and investing in targeted plant modifications, all while maintaining and improving on an 80% production efficiency target, OGUK’s survey showed.

The UK Government is making rapid progress in developing market structures for carbon capture and hydrogen market design, the association noted in the report, but it also said that “Current volatile market conditions underline the need for diverse sources of oil and gas and ongoing development of indigenous resources.”

Without additional investment, the proportion of anticipated oil and gas demand supplied from local resources could fall to around one third by 2027, OGUK warned.

In addition, more work is needed to ensure the energy transition will support local economies and jobs, according to the association. Increased investment associated with the North Sea Transition Deal (NSTD), and more widely across the energy sector, will have its greatest impact where it can make the most of the UK’s existing supply chain.

“This means building on existing advantages and expertise derived from oil and gas projects and moving quickly to develop competences in new market segments as they emerge,” OGUK’s report says.

This year, the association expects a 10% reduction in oil and gas output as a result of outages that were postponed from 2020. The overall impact of this, combined with further reduced drilling activity, means that emissions for 2021 are likely to remain around the level in 2020.

“In conclusion, new production with improved emissions intensity can be brought online whilst maintaining industry’s emissions reduction progress in line with the North Sea Transition Deal,” OGUK said.

“The progressive greening of our energy consumption and supply will involve large-scale and complicated projects carried out by companies with access to the required financial capital. I firmly believe that our operators and supply chain are in prime position to make this change happen at pace and to the wider benefit of the UK economy and communities it supports,” OGUK’s CEO Deirdre Michie said in foreword to the report.

Responding to the UK Government’s announcement on the selected carbon capture and storage ‘cluster’ projects to be taken forward for Track 1 negotiations for deployment in the mid-2020s, OGUK has underlined that the UK will need all of the proposed cluster projects – and more – if it is to achieve net-zero carbon emissions by 2050.

The same association noted at the end of September that surging global gas prices showed the UK must maintain its North Sea supplies.

“This price surge shows how we continue to need UK gas. Letting production fall faster than we can reduce demand risks leaving us increasingly dependent on other countries, and at the mercy of global events over which we have no control,” OGUK Energy Policy Manager Will Webster said.

“While the UK continues to use oil and gas, we should make the most of the resources in our control while working for a low-carbon future,” Webster added.

A few days later, OGUK said that the UK’s North Sea gas reserves could buffer consumers against energy shortages and price rises. However, much of that gas lies in fields and resources that have yet to be developed. Without any investment in those new resources, the UK’s gas output is likely to decline by 75% between now and 2030, the association noted.

“The gas resources off our own shores can boost our energy security and protect jobs. The UK industry’s own greenhouse gas emissions, generated during production from these new fields, would also be a lot lower than those generated by liquefied natural gas imports,” OGUK’s CEO Michie said.

Greenpeace lost in October a court case in which it had challenged the drilling permit for the Vorlich site off Aberdeen given to bp in 2018.

“Greenpeace’s legal action to block production from the Ithaca Energy and BP Vorlich oilfield in the North Sea has been turned down by Scotland’s highest court in a decision strongly welcomed by OGUK, which represents the UK’s offshore oil and gas industry,” OGUK said. 

“This is a victory for common sense and for the UK’s energy security. If the ruling had gone the other way, it would have generated uncertainty among the hundreds of companies involved in producing the nation’s oil and gas. They might spend millions of pounds on getting a new oil or gas field licenced only to see it revoked by a court action,” said Michael Tholen, OGUK’s sustainability director.

The UK’s Oil and Gas Authority (OGA) announced at the end of September a £1-million decarbonisation competition for the electrification of offshore oil and gas installations. The competition is designed to advance the widespread electrification of offshore installations on the UK Continental Shelf (UKCS), which are powered by gas or diesel. Power generation accounts for around two thirds of oil and gas production emissions, according to OGA. 

“Electrification of oil and gas installations is a vital part of industry’s licence to operate and to meet its North Sea Transition Deal emissions reduction targets,” OGA Chief Executive Dr Andy Samuel said. 

“This is also a big opportunity for industry to support offshore wind expansion, with lasting infrastructure that will provide benefits beyond oil and gas, long into the future,” Samuel added.

In October, OGA awarded a carbon dioxide (CO2) appraisal and storage licence to Harbour Energy, expected to boost the drive to reach net-zero greenhouse gas emissions by 2050. The licence will cover an area in the Southern North Sea off the coast of Immingham in North East Lincolnshire. Harbour’s proposal is to reuse the depleted Rotliegend gas fields, Viking and Victor, some 140 kilometres from the Lincolnshire coast, to securely store the CO2 in deep geological formations around 9,000 ft below seabed, and potentially utilise the Bunter Formation aquifer which could offer additional options to increase the future storage capacity of the project.

OGA also unveiled on 14 October the new digitised Pipeline Works Authorisation (PWA) system which will make consents quicker and easier to request and save time and money for industry users.

The authority published its inaugural Emissions Monitoring Report, which shows the UK upstream oil and gas industry must go much further and faster in its drive to cut emissions. OGA urged the UK upstream oil and gas industry to accelerate the pace of emissions reduction activities.

In company news, Serica Energy said in its half-year update to the market that its growth strategy would continue into 2022 as it would drill the North Eigg exploration well.

“In the case of success at North Eigg we believe that it would be possible to develop the resources in a carbon neutral manner,” the company said.

IOG plc said it had successfully drilled, cleaned up, and flow tested to a maximum gas rate of 45.5 mmscf/d the Blythe well 48/23a-H1, the second Phase 1 development well. The Blythe field is planned to be produced through the Blythe normally unmanned platform, via the pipeline laid earlier this year, which connects to the main Saturn Banks pipeline to Bacton. The IOG continues to expect First Gas from both the Blythe and Elgood fields in Q4 2021, once the final subsea and onshore installations are complete.
Wood expanded its operations in the Southern North Sea with the award of a new operations and maintenance contract with Shell UK in the Southern North Sea and Nederlandse Aardolie Maatschappij (NAM). 

Cognite has signed a new agreement with bp to provide single consolidated data layer for bp’s well operations.

“bp is pleased to extend our strategic partnership with Cognite to focus on optimisation through contextualised data,” says Ahmed Hashmi, Senior Vice President Digital, Production & Business Services, bp.

Deltic Energy announced that the company and its operating partner, Shell U.K. Limited, had completed the final phase of the site survey programme over the planned Pensacola exploration well location on Licence P2252 in the Southern North Sea.

EnQuest said it had completed the acquisition of a 26.69% non-operated equity interest in the Golden Eagle Area Development.

“As a highly cash generative asset, delivering material incremental production, reserves and resources, Golden Eagle is a great addition to our portfolio, further strengthening the Company,” EnQuest CEO Amjad Bseisu said.

Read the latest issue of the OGV Energy magazine HERE.