- OGA Plan will now just use absolute emissions in reductions rules
- Ithaca boss says electrification demands unrealistic given tax levels
Updated rules for North Sea emissions cuts give companies more room to breathe after the industry pushed back on a draft plan aimed at encouraging electrification and closures of the most polluting platforms. The government is facing the difficulty of cutting national emissions while also asking oil and gas producers to keep investing in the UK. The North Sea's big players, such as Harbour Energy (HBR), have cut investment in recent years due to higher taxes and more attractive geology elsewhere.
Late last month, the North Sea Transition Authority (NSTA) published updated emissions guidelines, known as the OGA Plan, after a consultation period with industry figures and two climate-focused organisations.
The new plan added more leeway on electrifying platforms and other infrastructure, and also allowed companies to show total emissions falling rather than emissions intensity, which is likely without further investment given falling production.
“The NSTA agrees that the use of emissions intensity as a metric in the proposed requirement, for a declining basin such as the UK continental shelf, is not helpful,” the regulator said. “Emissions intensity is an important metric, and the NSTA will continue to monitor it, but has removed the reference to ‘intensity’ in this requirement, for a more appropriate focus on overall emissions.”
A spokesperson for the regulator said this was not a relaxation of the rules. “We will continue to monitor and report on overall greenhouse gas emissions to help track industry’s progress against the [North Sea Transition Deal] targets.
“However, individual platforms will need to improve their performance on emissions if targets are to be achieved and surpassed.”
Heather Plumpton, senior policy analyst at Green Alliance, which took part in the consultation, said a shift away from emissions intensity made the plan “not as ambitious”. She added that both measures should be considered, given overall emissions can go up even when intensity goes down, and vice versa. She called the plan “quite soft”.
“Our view of the plan was that there aren’t very strong mechanisms in there to hold companies to account,” she said.
The transition deal aims for operational emissions to drop 50 per cent between 2018 and 2030, although this goal is not explicitly linked to the OGA plan updated last month.
The industry has slashed investment in the North Sea following the Energy Profits Levy, and further declines are likely, meaning the 2030 target for absolute carbon dioxide (CO2) equivalent emissions to fall to 9mn tonnes from 14mn tonnes in 2022 is attainable.
But for emissions to come down further, platforms need to be modernised through technologies such as electrification.
This involves connecting energy-hungry platforms to mains power, to cut down on the use of diesel and gas for electricity. It will be hugely expensive, and so far untested in the UK North Sea.‘Fuel supply’ infrastructure, which also includes refineries and gas network leakages, accounted for 8 per cent of UK emissions in 2022.
The NSTA’s previous aim was for electrification wherever possible, but it now says “other forms of low carbon power [are permitted] if relevant persons can present credible evidence that near equivalent emissions reductions to electrification will be achieved”.
The NSTA spokesperson said no other technology was currently available that would have a similar impact to connecting platforms to the grid.
A spokesperson for Offshore Energies UK, a lobby group that contributed to the emissions plan, said it “would support absolute emissions reductions in the sector”, and said the new OGA Plan language around electrification could open the door for hydrogen and biofuel technologies to fall within NSTA guidelines for emissions reductions.
The North Sea is already seeing a shake-up as companies look to maximise returns from remaining assets. There are plans to exploit new fields, but these have been hit by higher borrowing costs and the Energy Profits Levy.
Ithaca Energy (ITH) has both a stake in Equinor’s Rosebank project and owns 100 per cent of another massive field, Cambo. The company is also considering a plan to connect infrastructure in its Captain field to the mains grid.
Executive chair Gilad Myerson said the producers were already being squeezed by higher taxes and regulatory uncertainty, so asking for investments worth hundreds of millions of pounds was unreasonable. For instance, connecting the Captain field to the grid could cost up to $350mn (£281mn).
“If the fiscal environment around the industry, and specifically around electrification, was stable, Captain would be the first platform in the North Sea to be electrified in the UK,” Myerson said. But asking the owners of all fields close enough to the mainland to be electrified to do so would be the wrong approach, he said.
“Several of the targeted electrification projects that we've seen in the North Sea that have been proposed by the regulator just don't make sense from an emissions standpoint,” he added, comparing it to trying to install a battery and electric drivetrain in a 40-year-old truck. “Electrifying for the sake of electrifying only is where people start making wrong decisions.”
