Oil and Gas Sector Call for Public Funding to Help Climate Ambitions

March 16, 2021by Extractives Baraza
The oil and gas industry has warned it will require funding to help efforts to transform Scotland and the UK into carbon neutral economies
The oil and gas industry has warned it will require funding to help efforts to transform Scotland and the UK into carbon neutral economies. (Image source: The Herald)

By: David Bol

Scotland’s oil and gas industry has appealed for public funding amid a warning a £3 billion hit to the sector could put ambitions to transform operations away from fossil fuels at risk.

Oil and Gas UK (OGUK), the industry body for the UK offshore sector, has warned that in order for Scotland and the United Kingdom to meet pledges to become carbon net zero, investment in technology is vital.

But opponents have warned that public investment to encourage the oil and gas sector to move away from fossil fuels is simply “throwing more money at the problem”.

A new report from OGUK has highlighted that the industry is facing a tough recovery from the pandemic and will need investment to help it overhaul its operations to contribute to net zero targets.

The UK Government has committed to become carbon neutral by 2050, while the Scottish Government has pledged the change will be in place by 2045.

The document stresses that “the ability of our sector to recover, and its pace, remain an ongoing concern”.

It points to initial forecasts that direct and indirect redundancies in the industry could be as high as 30,000 due to the pandemic and reduced investment and activity levels, which “remain a reasonable estimate”.

The Scottish Government’s updated climate change plan stresses that expertise in the oil and gas sector “will be critical to delivering net zero solutions”, including scaling up offshore wind energy, carbon capture and storage and renewable forms of hydrogen.

It adds: “We are working with industry to plan how to support workforces to transition to these new job opportunities, ensuring no one is left behind.”

Scottish ministers expect industrial emissions to reduce from 11.3 MtCO2e of carbon in 2020 to 6.5MtCO2e by 2032 with negative emissions technologies such as carbon capture and storage next expected to play any part until 2029.

The OGUK report points to findings by statutory adviser, the Committee on Climate Change, which it says has estimated “investment in the energy sector may need to double to £50bn per year to achieve net zero”. The only carbon capture and storage project set to be pushed forward so far is the Acorn project in North East Scotland – with an investment decision expected by the end of this year of the early part of 2022.

OGUK chief executive, Deirdre Michie, said: “£3bn worth of investment has been deferred from company plans in 2020 and 2021 – and the effects of Covid-19 have really undermined energy communities, causing a rise in unemployment and a slump in activity.

“A climate-friendly future needs significant investment in indigenous opportunities so companies right across the sector can continue to develop low-carbon solutions.

“That is why we are working with the Government to deliver a transformational North Sea Transition deal, which will drive forward carbon capture and storage, hydrogen and low-carbon projects across the UK.

“This is an industry which continues to play a critical role in the economy, supporting hundreds of thousands of jobs in industrial heartlands across the nation, generating affordable energy for millions and providing billions in value to the economy.

“But we cannot continue on this trajectory without vital support. Companies are in a fragile state.

“We need the recognition that our industry is a key player in a successful energy transition – one which won’t be possible without the inclusion of our sector.”

The Scottish Greens have called for transition of oil and gas to speed up. The party’s climate spokesperson, Mark Ruskell, said: “Subsidies for the oil and gas sector is not an investment in a green recovery, it’s throwing more money at the problem.

“Transitioning away from fossil fuels means investing in the alternatives we have now, not waiting for oil giants to manage their own decline.

“We have just nine years left before climate science tells us is the point of no return. We simply don’t have time to pin all our hopes in unproven technology offered up by the same industries that are exploring ways to expand oil and gas extraction.

“Countries like New Zealand and Denmark have already called a halt to new oil and gas extraction. Scotland needs to at least match that if we are going to talk about a green recovery.”

A UK Government spokesperson said: “The oil and gas sector supports 270,000 jobs across the UK and plays a key role in developing the infrastructure needed to deploy green technologies such as carbon capture and storage and hydrogen power.

“Oil and natural gas is still required for heating, cooking and transport, and vital to the production of many everyday essentials like medicines and plastics – this is likely to remain the case over the coming decades as the UK transitions to low carbon solutions.

“We will shortly agree a transformational North Sea Transition Deal with industry to create jobs, retain skills and deliver new business and trade opportunities to support the sector’s transition to a lower carbon future.”

A Scottish Government spokesperson said: “We are wholly committed to ending Scotland’s contribution to climate change and doing so in a way that is fair for all, ensuring a green recovery and a just transition that supports good green jobs, skills and expertise and leaves no-one behind.

“The oil and gas sector will play a positive role in our transition to net-zero, helping to design the diverse energy system we need for the future.”Scotland’s energy strategy already identifies a crucial role for the sector in the energy transition that is required to move to an economy and society that generates net zero greenhouse gas emissions. The knowledge and experience this sector’s workforce brings will be important for developing and investing in low carbon technologies, such as carbon capture utilisation and storage.

“The Scottish Government’s continued support for oil and gas sector businesses operating in the North Sea is now conditional upon contributing to a sustainable, secure and inclusive energy transition, which we are supporting through our £62 million energy transition fund.

“The oil and gas and energy transition strategic leadership group has been driving progress on decarbonisation in the oil and gas sector.

“We will continue to work with and, where appropriate, challenge the UK Government to take action in key reserved policy areas in order to achieve our net-zero ambitions, including on delivery of the sector’s roadmap 2035 and a transformational North Sea transition deal that will decarbonise the remaining production in the North Sea.”

Source: The Herald

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