The chairman of the UK’s oil & gas regulator has warned North Sea business leaders the industry is facing an existential threat and now has no “second chance” if it fails to adapt and demonstrate it is taking action to help reduce carbon emissions.
In a hard-hitting speech in Scotland, Oil & Gas Authority (OGA) chairman Tim Eggar told senior industry figures the sector was at risk of losing its “social licence to operate” if it could not show it is part of the solution to tackling climate change “rather than continuously being seen as the problem or the blocker”.
This included making much faster progress in reducing the amount of climate-heating gasses produced by its own operations.
“Industry is not even really in the argument never mind winning it,” Eggar said. “[The oil & gas industry] is, in my opinion, collectively not doing enough and its social licence to operate is under serious threat.
“There has been too much navel-gazing. We have to act much, much faster and go farther in reducing the carbon footprint. Our energy systems must keep improving at pace, to become cleaner and more efficient and this requires ambitious thinking, capital investment and bold leadership. Action not just talk or more analysis.”
Eggar assured the industry that for many years to come it will have a vital role to play in providing the UK secure energy supplies — in particular through its production of natural gas — and has the chance to “survive and thrive”.
With the right action it is even feasible the UK North Sea industry could be “carbon negative by 2050”, he argued.
But ahead of the COP26 climate conference in Glasgow in November, industry “needs to have developed and gone public on a compelling package of measures which demonstrates real, genuine leadership and commitment to net zero” carbon emissions, including committing to setting “clear measurable greenhouse gas targets” and reducing its emissions of methane.
“Now is not the time for anyone to be waiting on anyone else," he said.
“I have been involved one way or another in this industry for over 40 years. I have been through a number of oil price cycles but I cannot remember anything like the industry rethink of the last few months,” said Eggar, a former UK energy minister.
“Clearly, climate change is happening right now. That debate is over. The framework, the licence to operate for the industry, has changed fundamentally and — unlike the oil price — forever.
“If the industry wants to survive and contribute to the energy transition it has to adapt.”
Environmental lobbyist Greenpeace UK said: “The OGA is right to warn that the oil industry’s social licence is under threat. In fact, in this climate emergency there can be no legitimacy for an industry that makes its profits by pouring fuel on the fire.
“Instead, we need a complete phase-down of the oil industry in the North Sea and globally, and companies like BP and Shell must rapidly transition to renewable energy.
“It’s too late for oil companies to reclaim their social licence. Given the climate emergency, oil companies’ future depends on how quickly they stop being oil companies.”
Eggar, who was appointed OGA chairman in March 2019, also called for faster progress in delivering at least one of the five major carbon capture and storage projects currently under consideration in the UK.
Other energy integration projects, such as powering offshore oil platforms with electricity generated onshore and from renewable sources, must also move forward, he said.
“Public opinion on climate change, and the government’s legally-binding commitment to net zero emissions by 2050 and 2045 in Scotland, means that we have to do everything we can to contribute to achieving this.
“That applies to the OGA, and to every oil and gas operating and service company,” he said.
Last year the UK government — in a first for a G7 country — committed to have net zero carbon emissions by 2050.
Yearly greenhouse gas emissions from the running of UK oil and gas platforms currently stand at about 14.5 million tonnes, or about 3% of the British economy’s total output.
The UK government’s independent climate advisers have said the industry can afford to emit only 500,000 tonnes per annum in a net zero world.
According to trade body Oil & Gas UK, this would mean going from 24,000 tonnes of carbon dioxide equivalent for every 1 million barrels the UK industry produces to less than 4000 tonnes of CO2 equivalent — an 85% reduction.
The 2014 Wood Review recommended establishing the OGA to drive a new tripartite strategy with industry and government, known as MER UK, to retrieve as much of the Britain’s oil and gas reserves as possible even if sometimes that is not in the commercial interests of individual companies.