North Sea oil & gas operators raise the decarbonization bar with potential investments of nearly $3.8 billion

As the global energy transition momentum keeps growing, the UK’s regulator, North Sea Transition Authority (NSTA), has spotlighted up to £3 billion ($3.76 billion) of emissions reduction schemes proposed by North Sea companies at its annual performance review of Britain’s top 20 oil and gas operators.

While explaining that North Sea operators could invest up to £3 billion in 14 major projects capable of cutting up to 32 million tons of lifetime CO2 emissions from their production activities, NSTA highlighted that this quantity is greater than London’s estimated annual emissions in 2021.

As oil and gas players continue to take action on emissions reduction to safeguard the industry’s future and sustain production, these 14 projects are said to entail the use of low-carbon power on platforms, the installation of technologies designed to eliminate routine flaring and venting, and hydrogen.

These proposed developments, which could potentially go live between 2024 and 2030 on new and existing projects, are believed to be positioned to make a significant contribution to achieving the sector’s emissions reduction targets. 

As final investment decisions (FIDs) have been secured for fewer than half of these projects, more work needs to be done, thus, the NSTA expects operators to press ahead with all of them and come up with more emissions reduction schemes in the coming years.

With its data and benchmarking insights at the annual Tier Zero meeting, the NSTA set out to show operators how they compare to each other to showcase good practices and drive improvements while also outlining its near-term priorities, which include energy production, emissions reduction, and well decommissioning this year.

Recently, the NSTA published the OGA Plan – focused on emissions reductions – to build on existing decarbonization targets and put the operators on the right track to reach net zero, emphasizing the need to make production less emission-intensive, and calling for concerted action, including on power generation, and an end to routine venting and flaring by 2030.

Since oil and gas meet around three-quarters of the UK’s energy needs, Britain is expected to remain a net importer up to 2050 even as demand declines. The UK Continental Shelf (UKCS) production fell by 11% last year, a decline exacerbated by unplanned outages, while production efficiency was 77%, down one percentage point.

In light of this, operators were reminded of the longstanding 80% target and urged to redouble efforts to tackle the root causes of the unreliability of some assets. The UK regulator took the opportunity to promote well interventions as a cost-effective way to boost production since the intervention count fell from 450 to 402 in 2023.

During the meeting, the NSTA’s stamp of approval for eight oil and gas developments since 2023 was highlighted. These projects, which target 430 million barrels and require £4.4 billion (close to $5.51 billion) of investment, are expected to improve Britain’s energy position, generate tax revenues, and create supply chain jobs.

While operators are working on proposals for 14 oil and gas projects capable of yielding more than 750 million barrels, the UK regulator underlines that all proposals need to go through an effective net-zero assessment to ensure they are compatible with net-zero targets.

Even though the industry curbed its production emissions by 23% between 2018 and 2022, with preliminary data suggesting a further drop in 2023, the NSTA believes a risk remains that the sector will not deliver on its commitments to cut emissions by 50% by 2030 and 90% by 2040, on the way to net zero by 2050, without further abatement measures.

Stuart Payne, NSTA’s Chief Executive, commented: “While the argument for continued domestic production is strong, it only stands up if operations continue to get cleaner. Today we saw again the range of opportunities industry has to lower emissions and secure production. We know the UK has a world class workforce able to innovate, adapt and deliver complex technical solutions.”

As the North Sea basin continues to mature, more wells will permanently stop producing and require plugging and abandonment, thus, the UK regulator told the oil and gas industry players to get to grips with well decommissioning obligations to retain support for their operations, as compliance has been mixed in recent years, with licensees continuing to request deferrals, despite the guidance on well decommissioning.

With this in mind, the NSTA also wrote to licensees in November 2023 to warn that those failing to comply would be held to account. Britain’s regulator is also spearheading a project to identify which UKCS wells will be ready for decommissioning between 2026 and 2030 and assess the supply chain capacity required to undertake the work in a timely and cost-effective manner.

Moreover, the collected insights are expected to guide the regulator’s engagements with the industry to promote collaboration and, where appropriate, facilitate well decommissioning campaigns involving multiple operators and fields. This approach is said to have the potential to save time and money while also slashing emissions.

Payne concluded: “Operators must routinely seek out opportunities to deliver significant emissions cuts, leaving no stone unturned. This is vital to preserve widespread support for the sector, enabling it to go after future barrels.

“Industry also needs to live up to its well decommissioning responsibilities – another threat to its credibility, which hangs in the balance. Companies who fall short will be held to account by the NSTA. We won’t back down on this priority.”