Green energy transition: vital role of the oil & gas industry in achieving net-zero by 2050

The following article is a guest post by Myles Mantle, a partner specialising in project development and finance at Haynes and Boone, an international commercial law firm, and Shu Shu Wong, an associate at Haynes and Boone.

The article examines the UK’s efforts towards reaching net-zero by 2050 and the role of the oil and gas sector in the energy transition.

The UK Oil & Gas Authority (OGA) has recently revealed plans to introduce new legally binding obligations on oil and gas companies operating in the UK Continental Shelf (UKCS) to assist the UK in becoming carbon neutral by 2050.

As oil and gas will remain a crucial part of the UK’s energy mix for the foreseeable future, it will be important to concurrently focus efforts in the three areas: maximising economic recovery from the UKCS, minimising greenhouse gas emissions, and reducing reliance on hydrocarbon imports.

The OGA has said that the oil and gas sector must go “faster and farther” to reduce its carbon footprint or “risk losing its licence from society to operate”.

It has also emphasised that maximising economic recovery of oil and gas need not be in conflict with the transition to net-zero, as the industry has the skills, technology, and capital to help the UK achieve the net-zero target.

Back in December 2019, the OGA published a report known as the “UKCS Energy Integration: Interim Findings” which supported the innovative partnering between oil and gas, renewables, hydrogen and carbon capture, in order to accelerate the energy transition.

In particular, the report finds that multiple offshore integration concepts are technically feasible and would be viable options for helping to reduce the oil and gas industry’s carbon footprint and support delivery of the UK’s net-zero target.

Some of the concepts explored in the report include:

• platform electrification, which could significantly reduce emissions on oil and gas installations by using low-carbon electricity, including from renewables onshore or even directly from offshore wind farms, to replace generation from gas and diesel;
• gas-to-wire (GtW), which may enable gas produced offshore to be converted to electricity on the platform and transported onshore using existing windfarm cables;
• carbon capture and storage (CCS), which has already been piloted offshore and is considered essential in all UK decarbonisation scenarios;
• hydrogen, which has feasible production avenues through both ‘blue’ hydrogen (produced by natural gas reforming) and ‘green’ hydrogen (electrolysis produced by renewables) routes, enabling decarbonisation of power, heat and transport; and
• offshore energy hubs, which can help scale up net-zero energy solutions, for instance by allowing hydrogen to be generated offshore using windfarms and stored in reservoirs to be transported to shore using oil and gas infrastructure.

Oil & Gas UK, the British oil and gas trade association, published new guidelines in May focused on unlocking brownfield resource opportunities and helping companies maximise output from their existing North Sea assets amid the COVID-19 pandemic.

The OGA has also recently released data showing that the production of gas from fields in the UKCS generates less than half the greenhouse gas produced from imported liquefied natural gas (LNG).

This is due to a combination of the process of liquefaction and emissions produced by the transportation and regasification of the LNG once it arrives in the UK.

The data highlights the importance of continuing to meet as much of the UK’s oil and gas needs from domestic resources (though maximising output from existing reserves) while minimising emissions and supporting the drive to net zero.

Despite the challenges as a result of the ongoing COVID-19 pandemic, a number of energy majors such as Total and Shell have expressed their commitment to maintaining investments in low-carbon energy and technology, in particular in the offshore wind, solar and power storage sectors.

A green energy transition will require the industry to make real progress in reducing its carbon footprint.

Amidst the push to increase partnership with the renewables industry on the one hand, and the pressures to maximise production from existing assets, on the other hand, oil and gas companies are no doubt faced with a myriad of challenges and opportunities – will it be possible to pursue both objectives concurrently, or will the drive to renewables increase costs as against maximising production?

Header photo by SP Mac