North Sea industry needs to lead transition, not just curb own emissions: Shell
The North Sea oil and gas industry needs to go beyond pledges to cut emissions from its operations and take a central role in the UK’s effort to transition to net zero emissions in order to ensure its future, the head of Shell’s UK upstream business, Steve Phimister, said June 23.
Speaking at the same event, the chief operating officer of Petrofac’s engineering and production services business, John Pearson, said transition projects such as carbon capture and storage would be vital to the survival of the embattled service sector.
The comments, at an Oil & Gas UK forum, come after the group committed the UK’s North Sea industry to halving greenhouse gas emissions from its own operations by 2030, and a 90% cut by 2040, en route to the overall UK goal of net zero emissions by 2050.
Phimister, who is Shell’s vice president and director for the UK and Ireland, said the operational emissions cuts would be hard, particularly efforts to power offshore facilities from renewable sources, and would not be enough to ensure the support of the UK public and investors.
The industry must be part of the UK’s efforts to lead the way — ahead of some other countries — in trying to keep global temperature rises from greenhouse gases below 1.5 degrees Celsius, he said. “As an industry, we can’t really have the compelling investment proposition and we can’t thrive through the low-carbon, or energy transition without having the support of society,” he said.
“More wealthy or developed countries and regions will need to go quicker if they can, to enable other countries that can’t go so quickly to catch up in good time.”
“That means that for countries like the UK we need to go quickly, very quickly. For [oil and gas operators] it means urgent action,” Phimister said.
The government would need to play a role in updating regulations and the fiscal framework in support of the energy transition, but should not be expected to provide handouts in response to the economic crisis triggered by COVID-19, he said.
Oil and gas companies should “position ourselves as very much a part of the solution, and then, as economic models are put in place, and investment happens behind that, people will have a greater understanding … because we are driving decarbonization of the country, and not, with our handout, receiving money to decarbonize ourselves as an industry,” Phimister said.
As an example of regulatory change, Oil & Gas UK has said electrifying offshore platforms from renewable sources may require a specific contract for difference price mechanism for floating wind farms, compared with the price mechanism for fixed installations.
Plans to bring renewable electricity to oil and gas platforms, as has happened in Norway, are viewed as challenging.
Phimister noted Shell, with other oil and gas majors, is involved in several UK projects intended to capture carbon emissions and advance hydrogen as an energy source, including one on Teesside in northeast England, and a Scottish project known as Acorn.
“Ultimately we are all going to have to generate and derive businesses that are cash-flow positive from these sorts of investments. Today they are not. In the long term they have to be and therefore we need those [economic and regulatory] frameworks,” he said.
“As a [North Sea industry] basin we’re now very committed to net zero by 2050, but we certainly can’t do that as an industry on our own. It is a vital question that has been raised, how we position our industry and follow through and invest in the broader societal requirement to decarbonize the country, which is something that UK society is very keen on.”
Pearson, speaking for London-based service and engineering provider Petrofac, said the digitization of oil and gas operations would be crucial to reducing both costs and the industry’s emissions, enabling a reduction in the number of people deployed offshore. And for the embattled service sector, playing a part in longer-term energy transition projects would also be key, he said.
Oil & Gas UK has warned up to 30,000 jobs are at risk in the sector, mainly its supply chain, as a result of the current downturn.
“That approach of automating and digitalizing how our workers work is paying dividends already, and we’ve seen a 200%-300% improvement in the efficiency of these basic tasks: less people on less helicopters, less trips, less flaring,” Pearson said.
“We do a lot of work on maintenance rationalization, which has the same outcome. As well as addressing low-ish hanging fruit, it is vital for all of us … to move our portfolio toward energy transition topics,” he added.
Energy transition projects like carbon capture and storage “will require to be operated, maintained, and before that engineered, designed and built, and for many of us … certainly for Petrofac, that’s good business,” he said, noting Petrofac’s involvement in the Acorn carbon capture and hydrogen projects.