OGUK: Over $4 bln of lost investment during pandemic threatens net-zero future

Oil & Gas UK (OGUK), the representative body for the UK offshore oil and gas industry, has stated that securing and sustaining investment in the sector was critical to helping the UK quickly realise a net-zero future.

The findings of OGUK’s 2021 Business Outlook show that the industry is facing a period of extreme uncertainty as it grapples with the after-effects of the pandemic, which has led to a significant decline in offshore activity levels and overall levels of expenditure falling by more than a quarter in the last year alone.

OGUK said on Tuesday that, despite the challenges of the pandemic and the severe economic downturn, production from UK waters still managed to safely meet around 70 per cent of the country’s oil and gas needs in 2020. According to the representative body, this is evidence of the continued need for an indigenous supply.

“There are also some early signs of improved sentiment emerging, with new investors continuing to be attracted by the remaining potential of the North Sea”, OGUK said.

To realise the UK’s shared climate goals, as well as maintaining affordable energy and a strong base for the UK’s energy supply chain to build from, OGUK reinforced that government policy and regulation must continue to prioritise domestic production over imported energy.

OGUK chief executive Deirdre Michie said: “£3 billion ($4.17 billion) worth of investment has been deferred from company plans in 2020 and 2021 – and the effects of Covid-19 have undermined energy communities, causing a rise in unemployment and a slump in activity.

“A climate-friendly future needs significant investment in indigenous opportunities so companies right across the sector can continue to develop low-carbon solutions. That is why we are working with the government to deliver a transformational North Sea Transition deal, which will drive forward carbon capture and storage, hydrogen, and low-carbon projects across the UK.

“This is an industry which continues to play a critical role in the economy, supporting hundreds of thousands of jobs in industrial heartlands across the nation, generating affordable energy for millions and providing billions in value to the economy.

“But we cannot continue on this trajectory without vital support. Companies are in a fragile state. We need the recognition that our industry is a key player in a successful energy transition – one which won’t be possible without the inclusion of our sector”.

The UK oil and gas sector is currently under pressure as it awaits the government’s decision regarding future exploration. The government is considering declaring a ban on new exploration licenses.

Namely, the options on the table include an end to issuing licences in 2040 as well as an immediate temporary pause in licences. No change to the licensing regime is also one of the possible outcomes.