The annual economic report by the leading offshore industry body, falling emissions from North Sea operations, and approvals for new field developments were the highlights in the UK North Sea oil and gas sector in September.
Offshore Energies UK (OEUK), the leading industry body, published its Economic Report 2023, which calls for increased efforts to unlock billions of pounds in energy investment so that the UK can compete globally in offshore industries including renewables capacity, carbon capture, and low-carbon hydrogen.
“Make no mistake, the UK is in a global race for energy investment, and we need to be successful,” Dave Whitehouse, CEO at Offshore Energies UK, wrote in the foreword to the report.
OEUK estimates that the UK’s offshore energy sector could spend around £200 billionby the end of the decade on the effective management of oil and gas production and decommissioning, expanding offshore wind capacity, and establishing large-scale low carbon hydrogen production and carbon transport and storage industries.
But half of the estimated spending, £100billion, is associated with projects still awaiting final investment decision—they are either in planning or waiting for company and government approvals.
“Moving these projects forward is crucial in helping to build increased energy security, reducing emissions and providing new economic growth and employment opportunities,” OEUK said.
The UK could also potentially see £35 billion of oil and gas capital investment over the next 10 years, of which about half will go on projects in producing fields and half on new fields. However, nearly 70 percent of this projected investment has yet to be secured.
Without secured investment, the UK will produce 1.2 billionboe less over that period, and the loss will get larger over time. In addition, up to £70 billion could be spent on operations and more than £20 billion on decommissioning during the same period, according to the report.
“Achieving this depends on several factors which impact on investor sentiment and project economics – such as the competitiveness and stability of the fiscal regime, the cost environment, commodity prices and, importantly, government support for new licensing and exploration,” the industry body noted.
In the speech to launch the report, OEUK’s Whitehousesaid,
“The windfall tax is biting. All credible net zero scenarios say that we will need abated oil and gas for decades to come. In the first six months of this year, 13% less crude oil was extracted from the North Sea and the mainland. With investment on hold, our production volumes are as low as they have ever been.”
The UK needs to reframe the energy debate to help unlock investments, Whitehouse added.
“So, this debate is not oil & gas versus renewables. We need to support both oil and gas and renewable energy. Increasingly these are the same companies and people,” OEUK’s chief executive noted.
“Today the offshore oil and gas industry supports around 220,000 jobs and in 2022 generated almost £30bn in GVA, representing around 1.5% of the total UK economy. This is the bedrock of expertise on which we can build future energy infrastructure for the benefit of everyone in the UK,” Whitehousesays.
Separately, OEUK responded to the new Scottish Programme for Government, which reiterates Scotland’s commitment to accelerate the green energy rollout.
The Scottish Government pledged to speed up renewable energy projects with a new deal for the onshore wind industry. The government also plans to develop a Green Industrial Strategy to help businesses and investors realise the economic opportunities of the transition to net zero and of creating good, well-paid jobs in sectors such as offshore wind and hydrogen, while also supporting the development of sectoral Just Transition Plans.
OEUK’s Whitehouse commented on the plan,
“It is great to see clear intentions for energy expansion in the Scottish Government’s new programme for government. Yet this positive sentiment must include support for Scotland’s oil and gas sector.”
“As we build a sustainable energy future there is no simple choice between oil and gas and renewables. By the mid-2030s, oil and gas will still provide for 50% of our energy needs, so the reality is that to keep the lights on and grow our economy, we need both,” Whitehouse added.
“The companies investing in low carbon technologies require the cashflow from a stable and predictable oil and gas business to fund these opportunities, and any licences going forward are subject to a climate compatibility checkpoint and projected emissions have already been taken into account.”
Greenhouse gas emissions from UK offshore oil and gas production fell for the third consecutive year in 2022 as industry continued its drive to reach net zero by 2050, according to the latest Emissions Monitoring Report from the North Sea Transition Authority (NSTA).
The report estimates that emissions declined by 3 percent in 2022, which contributed to a 23-percentreduction in greenhouse gas emissions between 2018 and 2022.
Emissions were reduced in 78 percent of offshore facilities between 2018 and 2022, with 59 percent of the reductions comingfrom active emission reduction measures and the rest via cessation of production.
Methane emissions are estimated to have fallen by more than 40% between 2018 and 2022 to fewer than one million tonnes of carbon dioxide equivalent – a record low, NSTA’s analysis showed.
In addition, flaring fell by more than 10 percent last year, contributing to a reduction of nearly 50 percent between 2018 and 2022.
“Although industry is making strong progress, there is more work to do. The NSTA estimates that without the implementation of further emissions abatement initiatives, the sector will not meet the 2030 target,” NSTA said in the report.
The UK industry could look to Norway as an example of further declines in emissions.
While the carbon footprint of UK-produced gas is on average around a quarter of that of imported LNG, the pipeline gas the UK imports from Norway is cleaner, with less than half the production and transport-related carbon intensity of UK gas.
“The similarities between the UK and Norway offshore basins show there are considerable opportunities to make UK production even cleaner,” NSTA reckons.
Commenting on the report, HedvigLjungerud, NSTA Director of Strategy, said,
“The NSTA will steadfastly hold the sector to account on emissions, including its pledge to halve emissions by 2030, which is the absolute minimum we expect.”
OEUK also weighed in on the emissions report.
The reductions reported for 2022 are in line with the sector’s ambitious commitments under the North Sea Transition Deal, in which the industry committed to reduce emissions by 10 percent by 2025, 25 percent by 2027, 50 percent by 2030, and reach net zero in 2050, the offshore energy sector body noted.
Despite the progress, “this is the decade of delivery, not complacency,” OEUK sustainability and policy director Mike Tholen said.
“Our challenge now is to ensure the energy sector receives enough investment and the right long-term energy policy to significantly scale-up the solutions needed to meet the real challenge ahead; halving emissions by 2030 and achieving net zero by 2050,” Tholenadded.
In company and field project news, the UK government has approved the development of the Murlach oil and gas field project in the Central North Sea, some 203 km east of the Aberdeenshire coastline and 27 km from the UK / Norway median line.
BP, as operator of the project, proposes to develop the Murlach Field via a two production well subsea tie-back to the Eastern Trough Area Project (ETAP) Central Processing Facility by tying into infrastructure associated with the Seagull and Heron fields (the Heron field has ceased production).
Fluids will be exported via the existing Heron A production flowline to the ETAP CPF where these will be processed before onward export via the Forties Pipeline System and Central Area Transmission System.
The government has also approved proposals for the redevelopment of the Affleck field, discovered in 1975 and located in the UK sector of the North Sea 287 kilometres east-southeast of Aberdeen, and 5 km from the UK/Norway median line.
Operator NEO Energy is proposing to redevelop the field via two existing production wells (A1 and A2), with tie-in to existing riser, flowlines, umbilical and tie-in structures required for the project. The redevelopment is planned to include a subsea tie-back to the Harbour Energy operated Judy platform via the Talbot field (proposed by Harbour Energy). On the Judy platform, produced fluids from Affleck and the proposed Talbot development will be commingled with production from other nearby fields that are already operating, and separated into gas and liquids streams for export.
Ithaca Energy announced that it had agreed to buy the remaining 30-percent stake in the Cambo field from Shell, subject to regulatory approval.
A few weeks earlier, Ithaca Energy warned that “While we maintain our 2023 production guidance, due to our continued strong operational performance, it is clear that we, like the rest of the industry, will feel the impact of lower investment on our medium-term production outlook below previously guided levels.”
The company continues to evaluate development options for Cambo, to support submission of a field development application ahead of the associated licence milestone of 31 March 2024, subject to the outcome of the marketing campaign.
Wood and Harbour Energy, the UK’s largest oil and gas producer, have entered into a new strategic partnership for UK North Sea operations in a master services agreement (MSA) and associated contracts valued at around $330 million. Under the agreement, Wood will provide engineering, procurement and construction (EPC) and operations and maintenance (O&M) services, including digital and decarbonisation solutions, for a number of Harbour’s offshore assets. The partnership will run for an initial term of five years, with five one-year extension options covering Harbour’s operated assets, including its J-Area, Greater Britannia Area, Solan and AELE (Armada, Everest, Lomond and Erskine) hubs.
Hartshead Resources and its joint venture partner Rockrose Energy, part of Viaro Group,said that the Gardline Vessel “Ocean Observer” hadbeen mobilised to the Anning and Somerville field locations to commence a survey of the pipeline routing for the gas offtake from the fields. The survey is expected to be completed in early October, subject to any weather downtime.
Hartshead has also received bids for the Engineering, Procurement, Installation and Commissioning (EPIC) contract for the Anning and Somerville platforms. The company will now review each bid prior to providing a recommendation to the JV Operating Committee as to which bidder to award the contract to.
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