Building a net-zero energy system
How the UK oil and gas industry can play a pivotal role
Chairman, Chief Analyst and author of The Edge
Chairman, Chief Analyst and author of The Edge
Simon is our Chief Analyst; he provides thought leadership on the trends and innovations shaping the energy industry.
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Does the UK’s commitment to decarbonisation sound the death knell for its ultra-mature oil and gas sector? I chatted to Malcolm Forbes-Cable, VP Consulting, who co-authored Closing the Gap – Technology for a Net Zero North Sea. On the contrary: he reckons it could be a golden opportunity for the industry to re-invent itself.
What’s the challenge?
The UK is still a top 20 producer of oil and gas globally, but the sector’s in its dotage with more than 80% of likely reserves already produced. And it’s getting tougher to justify investment in upstream, given the UK’s commitment to net zero by 2050, the first major economy to do so. The world will need oil and gas for decades to come – the UK and other producers will just have to deliver as efficiently as possible and with minimal GHG emissions. The UK offshore industry itself aims to cut 50% of emissions by 2030 and 100% by 2050.
How can producers cut emissions?
Scope 1 and 2 emissions from offshore fields make up around 3% of the UK’s total GHG emissions. Eliminating methane leakage, venting and flaring is possible through stricter procedures and the tightening up of operating systems on the platforms and pipelines. Eliminating emissions from onboard power generation will be tougher. There’s a lot of power usage – 24 TWh a year, or 8% of UK electricity demand. Electrification using renewables and energy storage is the goal, but it’s got to be dependable, consistent power. It’ll be years before a zero-carbon system can be in place without diesel or gas as back-up.
What does the UK offshore sector have to offer on decarbonisation?
It’s one of the windiest geographies on earth that’s close to a big power market. Then there’s the infrastructure – more than 300 platforms and 12,000 kilometres of pipelines that zero-carbon technology could leverage. But one in two platforms are over 30 years old, so the trick will be identifying those that can be repurposed. The UK also has world-class technology and engineering expertise, in oil and gas and in emerging zero-carbon technologies.
Which technologies will the UK look to?
First, offshore wind, which is already commercial. The UK today has 10 GW of fixed-bottom turbines installed (35% of global capacity) and a massive 45 GW pipeline. With turbine ratings set to double in 10 years, costs will fall even further. Floating turbines are the next step, waiting in the wings to exploit even windier, deeper water locations.
Second, carbon capture and storage – the UK is running 5 of the 32 projects currently under development globally. Commercialisation is some way off, with technical challenges and the need for the carbon price to be at least double today’s EUR30/tonne.
Third, green hydrogen, for which commercial application at scale is a decade or so away, awaiting cheap surplus power from the offshore wind industry. Blue hydrogen, produced using natural gas with waste carbon captured and stored, can bridge the gap.
How much will it all cost?
At least £270 billion over the next 30 years. We estimate £80 billion will be spent on future oil and gas production, including abandonment. The offshore wind build-out to 75 GW will cost another £60 billion, green hydrogen £70 billion and CCUS around £60 billion.
Who will invest?
The energy industry is champing at the bit, supported by the burgeoning availability of finance for green projects. Orsted, SSE, RWE, Vattenfall, Iberdrola and Equinor are the leading offshore wind players in the UK and among the biggest globally. It’s also a huge opportunity for Big Oil, including the other three big North Sea oil and gas producers, Shell, BP and Total. The UK looks the ideal market for them to establish credentials in offshore wind and other zero-carbon technologies that their new energy subsidiaries can leverage globally.
What’s the ultimate vision for the UK?
The main goal is to build an integrated energy system for the UK, one that fosters new industries and jobs, and delivers zero-carbon, low-cost power to consumers. But there are other markets with maturing oil and gas production and sizeable electricity markets – Australia, North America and in the Middle East, for example – could follow the same course. The UK can be an early mover and export the new technologies and skills, much as it did last century when the North Sea led the world into deeper water offshore oil and gas development.
The Edge takes a week off for the Wood Mackenzie EMEA Energy Summit 6 to 8 October. The Summit brings together many of the energy industry’s leaders to discuss ‘What does the crisis of 2020 mean for the future of energy?’ We hope you can join us.