​North Sea oil producers face demanding near-term carbon target

North Sea. Image: Nexen

A group of U.K. North Sea oil and natural gas producers face an ambitious government-mandated target to cut their emissions as soon as 2025 as the nation seeks to make more real its ambition for net-zero fossil fuel pollution by the middle of the century.

The U.K. government has set a goal of zeroing out net pollution, suggesting that companies of all kinds will have to rein in the greenhouse gases they produce. The cuts may need to happen much sooner than some expect.

“We need nearer-term targets to ensure action is happening now,” said Andy Samuel, chief executive of regulator the Oil & Gas Authority . “We would support a stretching target.”

Facing fierce competition from cleaner alternatives, the oil companies are probably able to cut emissions by about 30 per cent in the next five years, according to an executive who’s worked in the industry for more than 25 years.

“Our credibility will be damaged if the industry is not seen to be in action,” said Colette Cohen, chief executive officer of the Oil and Gas Technology Centre in Aberdeen, Scotland. “It may be easy for some assets to achieve the 30 per cent, but it may be much more difficult for others.”

A few major oil companies including BP plc, CNOOC Ltd. of China and Royal Dutch Shell plc are undertaking net zero “deep dives” with the British authority.

A draft measure proposed by the European Union this week included a binding target of net zero greenhouse gas emissions by 2050, with a revised target for 2030 to be put forward only later this year. That triggered criticism of the law by environmental activists, including Greta Thunberg, who called the law “surrender” because it doesn’t ensure more rapid action.

The U.K., which is leaving the EU, already has a system of declining carbon budgets mandated in law. Just what restrictions will be imposed on the industry and when hasn’t been decided, but the companies are starting to think about how they will respond and finding places they can make big savings.

More broadly, some oil companies are starting to target both the pollution they produce and also what the customers of their fuels emit.

The U.K. is also keen to showcase its efforts because it’s hosting the United Nations climate talks in November.

Pollution from oil and gas production is a small-but-significant share of emissions in Britain. The industry working offshore says it was responsible for the equivalent of 14.6 million tons of CO2 in 2018, about 3.5 per cent of the total emissions in the U.K.

Big Ambitions

Offshore oil and gas producers are starting from a difficult point because their equipment and fields are so old. The North Sea is one of the most mature producing basins in the world, with emissions higher than newer developments. For instance British producers emitted about double the carbon dioxide for each unit of oil and gas pumped in 2018 compared with Norway’s companies, according to one industry measure.

Any new North Sea target will only cover energy used to produce fossil fuels, not the pollution that comes from burning the end product .

The producers can cut emissions quickly by using cleaner fuels to run power generators, improving energy efficiency, cutting methane leaks and flaring, investing in automation and even tapping renewable power, Cohen said.

The challenge is to find market incentives that will make the transition faster, she said.

The Conservative party government has made a promise to spend 800 million pounds ($1 billion) on carbon capture technology before it won a majority in the general election in December. That could boost the North Sea as it provides a new service offering storage of heat-trapping gas. Those policies haven’t yet been fleshed out. The Department for Business, Energy & Industrial Strategy declined to comment immediately.

While companies in the basin are trimming emissions across their operations, “none of them are doing everything top quartile,” Samuel told the industry at a recent conference.

Speaking with reporters, Samuel said a 2025 emissions reduction target was possible, but he was reluctant to be drawn on likely levels and there would need to be a consultation process with industry during the next few months.

© 2020 Bloomberg L.P.

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