Triple crisis: balancing supply, price and climate [Gas in Transition]
David Whitehouse, CEO of Offshore Energies UK (OEUK) made a forceful case at the International Energy Week (IEWeek) conference, organised by the Energy Institute between February 27-29 in London, on how to balance the supply of oil and gas, price and climate, avoiding future disruptions in energy markets.
According to David Whitehouse, the energy transition must not make people poorer. It will be expensive and it is important to tell people the truth about how much it will cost. A successful transition is one that takes people with it, not one that imposes it on them.
The world will not decarbonise on goodwill alone. It will need $4.3 trillion/yr and much of this will need to come from the private sector. There will be a huge expansion in renewable energy, but the challenges associated with the intermittent nature of these supplies is still being engineered. The oil and gas sector can contribute to this, ensuring the world has the energy it needs while transition is happening.
UK’s offshore oil and gas sector
The offshore oil and gas sector is central to the UK’s energy security during energy transition. During the past 50 years, the North Sea has supported the UK with a steady flow of home-produced energy to keep lights on, vehicles moving and the whole economy working. OEUK “represents more than 400 companies in the energy supply chain in an industry that supports at least 220,000 jobs and an economic contribution of around £20bn/yr to the nation’s coffers.”
Energy sector skills are being used to upscale carbon capture and storage (CCS), hydrogen and offshore wind, the critical technologies required to help transition in energy intensive sectors.
Industry and government must work together to remove barriers to enable efficient deployment of the technologies to decarbonise the oil and gas sector. “We are all completely committed to the transition to green energy.” The offshore sector was “the first to sign up to a commitment to align with the UK’s net zero ambition. And we are in action reducing emissions in preparation for the future.”
The world needs to achieve a managed transition without disruptions. And so does the UK. The North Sea can keep supporting the UK's energy needs, ensuring energy security for the foreseeable future, instead of increasing reliance on imports, as the world transitions to net zero.
The transition to net zero will be the biggest engineering project the UK has ever seen and it needs consensus to support the industries and workers whose skills will be vital for building this energy future.
OEUK’s position is that there is no simple choice between oil and gas and renewables. The UK needs both. Increasingly, the same companies and people are needed to advance both.
According to the UK's Climate Change Committee (CCC), oil and gas provided 76% of UK’s energy needs in 2022, with almost half produced by the North Sea. Until recently UK oil production provided most of the country’s demand. According to OEUK, an additional advantage is that as the UK transitions, domestic gas production means gas prices are lower than the European average. The country should be aiming to get as much as possible of that energy from its own resources.
2024: a critical year
David Whitehouse sees 2024 as a critical year for the UK. The country will hold general elections where energy and the cost of living will be top of the political agenda. Energy projects take years to build and last for decades. It will be a year to remove energy from short-term politics and instead start planning for the decades ahead.
Policy decisions made in 2024 will be felt for decades to come. UK’s offshore energy companies could invest £200bn ($250bn) in homegrown energy production, but also in offshore wind, hydrogen and CCS, this decade alone. But they need policy that encourages investment, by streamlining regulatory consent and project approval processes.
He said: “A successful energy transition is one that is delivered with people and communities, not done to people and communities. A successful energy transition is one that delivers jobs and prosperity by working with our present industries, which are the platform for our green future.”
Emerging geopolitical challenges, increasingly unpredictable international markets, that threaten energy security are strengthening the case for domestic oil and gas production. “It is in a country’s interests to be producing its own energy.” The need to ensure energy security has been highlighted by recent global events.
The UK needs affordable, reliable, lower carbon energy which creates jobs, grows the economy and cuts emissions. “The path to this must be to be honest about imports, about trade offs and about what those trade offs will mean…we need supportive and stable policy.”
Natural gas
With electricity demand increasing, the UK government has backtracked on its Clean Grid Plan, announcing on March 12 that it will allow new gas-fired power plants to be built into the 2030s. But it will expect all new gas power plants to be "net zero ready,” meaning plants which are "ready to connect to carbon capture technology" or that could switch to burn hydrogen instead of gas.
The government said that while it will continue to move forward with its net zero targets and a focus on renewables, gas was needed as a "back-up.” Climate goals must be reached "in a sustainable way that doesn't leave people without energy on a cloudy, windless day.”
UK’s energy secretary, Claire Coutinho, said: "There are no easy solutions in energy, only trade-offs. And so, as we continue to move towards clean energy, we must be realistic." The need for continued gas generation into the 2030s as a back-up to ensure energy security and reduce costs has been recognised by the UK’s CCC.
The opposition Labour party confirmed that it would be open to some new gas power generation if old capacity needs replacing, but added that these will be part of a decarbonised power system, that will include carbon capture and hydrogen playing a limited backup role.
Responding on behalf of OEUK, David Whitehouse seized the opportunity to state “it is right for the nation’s energy security to replace ageing infrastructure with new gas fired power stations. Today gas remains the single largest source for UK electricity generation and will remain a critical part of our energy mix in the decades to come. On our journey to net zero, we should be making the most of our own UK gas reserves rather than imports. Backing our homegrown energy sector grows our economy, boosts jobs across our world class supply chain and delivers reliable supplies of cleaner energy for the UK.”
OEUK’s case for a homegrown energy transition is presented in its Industry Manifesto, published in February.