The UK Government has today (24 March 2021) announced its commitment to the landmark North Sea Transition Deal with the UK oil and gas sector. The deal provides a blueprint for Government and sector cooperation to decarbonise North Sea production in line with the Government’s net zero agenda.

The Government’s announcement that future licensing rounds will proceed, subject to a checkpoint system, has concluded the OGA licensing review and clarified the Government’s position that ongoing exploration and production in the North Sea is compatible with net-zero.

What is the North Sea Transition Deal?

The deal is intended to deliver on the Government’s Energy White Paper commitment to integrate the UK oil and gas sector into its decarbonisation strategy. The deal is the first announced by a G7 country and demonstrates the UK Government’s commitment to work in partnership with the sector, which is crucial to maintaining energy security of supply, supporting high-value jobs, and safeguarding the expertise necessary to achieve a lower carbon future.

The Government’s vision for a ‘clean’ oil and gas sector is as follows:

  • Sector investment in emissions abatement technology (electrification of platforms through offshore renewables, methane capture technology and an end to flaring);
  • Harness the sector’s existing capabilities, infrastructure and private investment potential to exploit new and emerging technologies such as hydrogen production, carbon capture usage and storage, offshore wind and decommissioning. This will in turn support new export opportunities, and secure new high-value jobs for the long-term;
  • Develop the skills of oil and gas workers to enable them to pivot to new roles in the low-carbon economy; and
  • The Government will introduce a new Climate Compatibility Checkpoint to take place before each future oil and gas licensing round to ensure licenses awarded are aligned with wider climate objectives. The Checkpoint will review evidence such as 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 emissions reduction targets. The Government will not proceed with future licensing rounds where evidence suggests that it would undermine the delivery of the UK’s climate goals.

Key government and industry commitments

The Government has been engaging with industry (led by industry body OGUK) over the course of 2020 – 2021 to agree a framework for the sector’s transition to a clean source of energy. The following commitments have been agreed:

  • Sector emissions reduction targets of 10% by 2025, 25% by 2027 and 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; and
  • 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.

Industry have broadly welcomed the deal and OGUK’s statement on the announcement can be accessed here.

We will be updating this post as further details of the North Sea Transition Deal are released. You can also follow the HSF Energy Notes blog for further articles on the Government’s decarbonisation strategy.

Laura Hulett
Laura Hulett
Partner, London
+44 20 7466 2937
Beatrice McGuire
Beatrice McGuire
Associate, London
+44 20 7466 2900
Amrit Gill
Amrit Gill
Associate, London
+44 20 7466 3060