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Fri, 27 November 2020

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Plans to decommission North Sea Oil rigs have been left adrift

Plans to decommission North Sea Oil rigs have been left adrift

There will be no energy transition – let alone a “just transition” to net zero – without the employment, expertise, revenues or indeed the energy resource that North Sea activity continues to provide, writes Richard Thomson MP. | PA Images

3 min read

Delays to the Comprehensive Spending Review make it harder for oil and gas companies to meet transition challenges. The industry needs a sector deal

It bears restating that even into its fifth decade of production, North Sea oil and gas is still an economic asset of enormous strategic importance, to the UK Exchequer as well as to the hundreds of thousands of jobs that the industry supports both offshore and on. 

It is a sector that will be contributing to our energy needs for some time to come and, as such, remains a vital component in our continued energy security. For all the ambitions that governments have of green transitions or the embracing of the hydrogen economy, there will be no energy transition – let alone a “just transition” to net zero – without the employment, expertise, revenues or indeed the energy resource that North Sea activity continues to provide.

Government policy – the existence or absence thereof – is therefore a huge determinant in terms of how private investment is directed within the sector. In that context, the scrapping of the autumn Budget and delays to the Comprehensive Spending Review (CSR) make it all the more challenging for the sector to find certainty in an environment already made more difficult by the impact of Covid-19.

Government policy – the existence or absence thereof – is a huge determinant in terms of how private investment is directed within the sector

Nowhere is this certainty more needed than on decommissioning assets. Around 470 installations will require decommissioning in the UK sector over the next 30 to 40 years. Companies seeking to plan their transition phase require security and certainty from government, so the delay to the CSR in this regard is unhelpful at best.

Playing its part, the Scottish government has already put £62m on the table in the form of an Energy Transition Fund. Aimed at helping stimulate a just transition which supports sustainable economic growth and jobs, the fund will help protect existing jobs as well as creating new employment by opening up opportunities through energy transition and harnessing private sector funding as companies move from oil and gas to low carbon and renewable investments. All told, it is anticipated that the fund will help lever in an overall funding package in excess of £900m.

Presently, the industry is looking forward to the long-anticipated sector deal from the UK government, which will help to position the industry to meet those transition challenges. Initiatives aimed at decarbonising the extraction process; taking forward CCUS; promoting transition projects and increasing the diversity of the workforce are all expected to feature in what eventually emerges.

It’s understandable that time should be taken to get proposed measures right and to make sure that they are in alignment with the long-term needs of the industry. However, with so much depending on the North Sea in terms of energy security, future economic contribution and our ability to meet climate targets, the government needs to bring this dismal year to a close with some good cheer in the form of a sector deal substantial enough to set us on course to meet collective shared ambitions in the decades to come.

 

Richard Thomson is the SNP MP for Gordon, and Westminster spokesperson on business and industry.

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