UK government unveils North Sea Transition Deal

4C Offshore | Tom Russell
By: 24/03/2021 BEIS

The UK government has announced a North Sea Transition Deal with industry, aiming to support high-skilled oil and gas workers and the supply chain in the transition to a low carbon future.

The sector deal between the UK government and oil and gas industry will support workers, businesses, and the supply chain through this transition by harnessing the industry’s existing capabilities, infrastructure and private investment potential to exploit new and emerging technologies such as offshore wind, hydrogen production, Carbon Capture Usage and Storage, and decommissioning.

Through the deal, the oil and gas sector, largely based in Scotland and the North East, government and trade unions will work together over the next decade and beyond with the aim to deliver the skills, innovations and new infrastructure required to decarbonise North Sea production.

Extracting oil and gas on the UK Continental Shelf is directly responsible for around 3.5% of the UK’s greenhouse gas emissions. Through the package of measures, the Deal is expected to cut pollution by up to 60 million tonnes by 2030 including 15 million tonnes from oil and gas production on the UK Continental Shelf - the equivalent of annual emissions from 90% of the UK’s homes - while supporting up to 40,000 jobs across the supply chain.

Key commitments in the North Sea Transition Deal include:

  • the sector setting early targets to reduce emissions by 10% by 2025 and 25% by 2027 and has committed to cut emissions by 50% by 2030
  • joint government and oil and gas sector investment of up to £16 billion by 2030 to reduce carbon emissions. This includes up to £3 billion to replace fossil fuel-based power supplies on oil and gas platforms with renewable energy, up to £3 billion on Carbon Capture Usage and Storage, and up to £10 billion for hydrogen production
  • by 2030, the sector will voluntarily commit to ensuring that 50% of its offshore decommissioning and new energy technology projects will be provided by local businesses, helping to anchor jobs to the UK
  • the appointment of an Industry Supply Chain Champion who will support the coordination of local growth and job opportunities with other sectors, such as Carbon Capture Usage and Storage and offshore wind
The UK government will introduce a new Climate Compatibility Checkpoint before each future oil and gas licensing round to ensure licences awarded are aligned with wider climate objectives, including net-zero emissions by 2050, and the UK’s diverse energy supply. This Checkpoint will use the latest evidence, looking at domestic demand for oil and gas, the sector’s projected production levels, the increasing prevalence of clean technologies such as offshore wind and carbon capture, and the sector’s continued progress against its ambitious emissions reduction targets.

The UK government said it is vital that any future licenses are granted to industry only on the basis that they are compatible with the UK’s climate change objectives. A dynamic checkpoint enables the assessment of ongoing domestic need for oil and gas, while expecting action from the sector on decarbonisation. If the evidence suggests that a future licensing round would undermine the UK’s climate goals or delivery of Net Zero, it will not go ahead. The UK government will design and implement the checkpoint by the end of 2021 through extensive engagement with a wide range of stakeholders.

In a further move to support the shift to green technology and renewable energy in the UK and around the world, the UK government has announced it will no longer provide support for the fossil fuel energy sector overseas from 31 March 2021. This follows the Prime Minister’s commitment to end taxpayer support for fossil fuels projects overseas as soon as possible at the Climate Ambition Summit last December and the decision on the date to end this comes after consultation with industry. This will include UK Export Finance support, international aid funding, and trade promotion for new crude oil, natural gas and thermal coal projects - with very limited exceptions.

The government is already committed to a 40 GW offshore wind target, which is expected to unleash around £20 billion of private investment in renewable energy by 2030, creating 60,000 new jobs and generating economic growth in areas such as north east of England, Yorkshire and the Humber, East Anglia and Scotland. An estimated 60% of spending on UK offshore wind will also be invested back into the economy by 2030.

To aid the transition to a green economy, the package follows the recent budget in which the Chancellor committed to funding that targets the oil and gas sector and supports businesses to develop green energy. This includes up to £27 million for the Aberdeen Energy Transition Zone to transform the area into a green energy hub, and up to £5 million additional funding for the Global Underwater Hub based in Aberdeen to open-up opportunities for the city to become a global hub for underwater engineering, including in offshore wind and hydrogen.