Swift Action Needed to Tackle Regulatory Barriers to Energy Transition

Source: www.gulfoilandgas.com 5/25/2022, Location: Europe

Tim Eggar, NSTA's Chairman, delivered a speech at the Southern North Sea Conference in Norwich on 25 May 2022. His speech, 'Swift action needed to tackle regulatory barriers to energy transition', is below:

BEGINS

Good morning. I would like to start by thanking EEEGR for inviting me here today.

Special thanks go to Simon Gray, who has done an admirable job building up EEEGR’s membership and influence.

Others could learn much from the way this region has maximised its strengths and is embracing the energy transition.

NEW NAME

Most of you will know that the Oil and Gas Authority became the North Sea Transition Authority two months ago.

This was the natural next step in our evolution.

We were set up in 2015 as the OGA to regulate the UK upstream oil and gas industry.

Our remit has fundamentally changed since then – and our old name only reflected part of what we did.

In 2021, we revised our Strategy to put net zero at the heart of our work, alongside stewarding production.

The government supported this stance in its North Sea Transition Deal, with bold targets for emissions reduction and investment in low-carbon projects.

Our role in the energy transition is growing all the time and now includes emissions monitoring and carbon storage licensing.

As the NSTA, we will be the power behind the energy transition on the UKCS.

ENERGY TRILEMMA

This is a critical time for the energy sector and society.

Addressing the energy trilemma was already a mammoth task.

But now we must do so against a backdrop of geopolitical instability brought on by Vladimir Putin’s war in Ukraine.

The UK has diverse supply sources and is, therefore, less exposed than European neighbours, despite our worrying lack of gas storage, which is something our country needs to address.

But we must not be complacent.

We must ensure that we can keep the lights and heating on, businesses operating, and transport systems moving.

To bolster security of supply, we must make the most of our home-grown energy resources.

Oil and gas currently meet around 75% of the UK’s energy demand and will play a major part in the energy mix for decades to come, as we advance to net zero.

Our teams are doing everything they can to ensure the NSTA is ready to launch an offshore licensing round as soon as the government finalises the Climate Compatibility Checkpoint.

We can deliver additional reserves quickly. Our analysis shows the average time from discovery to first production is just five years.

Indeed, there are examples of this work being completed in less than one year.

The UK North Sea will continue to generate plenty of work for the supply chain.

Thirty-three projects targeting 1.3 billion barrels of oil and gas are currently progressing through planning, on their way to consenting decisions being made.

A total of 890 million barrels of those resources could be sanctioned as early as next year.

The NSTA will continue to base its licensing and consents decisions on solid evidence.

We will not be influenced by ill-founded and sometimes hysterical assertions from people who simply don’t understand the complexity of North Sea developments.

According to the Climate Change Committee and the UK government’s Net Zero Strategy, the country’s carbon budgets can still be met if new fields are developed, provided additional actions are taken to reduce emissions, both in new and existing developments.

To those calling for a rapid wind-down of our industry, with little care for the impacts on jobs and security of supply, my message to you is simple:

The North Sea is open for business, and the NSTA will approve new oil and gas projects in the interests of UK energy security and in the interests of a just energy transition.

Equally, some operators might think – indeed, I know that some do think – that the sharpened focus on energy resilience excuses them from their duty to reduce their emissions.

They are not excused.

The UK produces oil and gas with a smaller carbon footprint than most other countries.

While this is a virtue, we expect operators to keep driving down emissions from existing operations.

Only new developments consistent with the North Sea Transition Deal will be approved.

We don’t want to hear operators complain that investing in emissions reduction technologies would make their oil and gas projects uneconomic.

Their balance sheets, strengthened by higher oil and gas prices, are there for all to see.

If they cannot come to terms with the environmental requirements, then they should not be trying to do business in the UKCS and there will be others who step into their shoes.

We want to see them using their high profits to make swift progress towards investing in major CCS, platform electrification and hydrogen projects. They should be going beyond the commitments they made in the North Sea Transition Deal.

To support industry – as well as the government’s plans to capture 20-30 million tonnes of CO2 per year by 2030 – the NSTA is preparing to launch the UK’s first-ever carbon storge licensing round on June 14.

ENERGY TRANSITION

The next phase of emerging low-carbon projects in the North Sea is of vital importance, as highlighted by the NSTA’s Energy Integration Project.

It found that integration can contribute 30% towards the UK’s net-zero target, mainly through CCS and hydrogen.

Add in wind, wave and tidal, and the UKCS meets 60% of the total.

The Southern North Sea has demonstrated how different energy systems can share space and complement each other for decades.

Its natural gas fields have been a pillar of the UK’s energy mix since the 1960s, and offshore wind has added a new dimension.

Twenty miles from where I stand today, we are working on a living, breathing example of energy integration – Bacton Energy Hub.

By combining gas, hydrogen, offshore wind, CCS and nuclear, the Bacton area can play a major role in the UK’s energy future.

I would urge you all to discover more by taking in this afternoon’s presentation on this project.

SUPPLY CHAIN

The UK supply chain is well-known and respected worldwide.

It must continue to develop new skills and technologies – and be ready to seize new opportunities when they arise.

The North Sea Transition Deal provides a template.

It included a pledge from operators to achieve 50% local content for all new energy transition projects by 2030, as well as in oil and gas decommissioning.

It is very easy to make a commitment to 50%. Regulators, both in the oil and gas sector and in the wind sector, have got to make sure that that is really delivered, as opposed to delivered on paper.

There has been a national failure in most sectors to build up and support the supply chain.

But the supply chain has not always risen to challenge. We need a collective effort in order to take advantage of opportunities.

In the NSTA, we are doing everything we can to make sure the 50% becomes a reality.

We meet regularly with operators to discuss their practices.

To facilitate these discussions, the NSTA refers to the key elements of the supply chain Stewardship Expectations, their Supply Chain Action Plans and engage on the use and benefit of Energy Pathfinder.

Pathfinder provides a clearer picture of upcoming North Sea activity, giving suppliers confidence to invest in new capabilities.

It hosts about 140 projects, mostly oil and gas and decommissioning, though increasing numbers of renewables schemes are being added.

It is the authoritative source of contract information right across the offshore energy space.

You can read more about the NSTA’s approach in our new Supply Chain Report.

If the wider industry can show the flexible and innovative thinking highlighted in the report, we stand a much better chance of achieving our goals.

The NSTA knows that the UK urgently needs a more streamlined regulatory landscape to help companies get their energy integration projects off the ground.

At present, businesses in all sectors need to engage with several regulators, government departments and bodies. It is a minefield.

The NSTA is working with its counterparts to ease the burden and ensure the UK’s energy transition potential is delivered.

We worked with BEIS, Ofgem, The Crown Estate and Crown Estate Scotland on the Energy Integration Project.

The NSTA and both crown estates are exploring the potential for coordinated carbon storage licensing and leasing rounds.

We are also collaborating to resolve other issues, including colocation of offshore wind and CCS.

However, we know there is a huge amount still to do – and much more pace is required to remove barriers to energy integration projects.

The regulatory and governmental system is not fit for purpose as we move from a series of siloes and specific regulatory latitudes towards an integrated energy transition.

The government, at the highest level, will need to make big decisions at pace in order to enable energy integration. A direct message, but a necessary one.


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