The North Sea oil and gas industry is synonymous with Europe’s reliance on fossil fuels – but a new report suggests it could play a key role in moving to clean energy.
Turning the Tide, compiled by professional services giant PwC and trade body Oil & Gas UK, sets out how the sector could move towards lower-carbon production and set a precedent for a greener future.
It argues the North Sea can become a global leader for the energy transition through carbon capture, utilisation and storage (CCUS) technology, aided by a change of infrastructure and the production of hydrogen.
Oil & Gas UK’s upstream policy director Mike Tholen said: “The transition to a lower carbon, diverse energy mix is an exciting opportunity for our transforming industry.
“With extensive skills, capabilities and infrastructure, we are well placed to support the development of low-carbon technologies such as CCUS and hydrogen, while reducing emissions from production operations.”
How the North Sea can transition to clean energy
The North Sea basin, located in northern Europe and bordered by nine countries – including the UK, Norway and Netherlands – is known for being rich in liquid petroleum and natural gas reserves.
It has produced almost 40 billion barrels of oil over the past 40 years and is one of the world’s most active offshore drilling regions, with 184 active rigs in 2018.
The report, which lays out the challenges facing the North Sea as the world moves towards a low-carbon future, is based on interviews with more than 20 key energy industry stakeholders.
It says the industry can expect to see an increased focus on innovation to drive the next wave of competitiveness, and speculates that operators and service companies have potentially cut costs as far as is sustainably possible.
This innovation in technology and business models has the potential to influence the energy transition, with renewable energy sources set to replace gas turbines on some offshore platforms.
The geography of the basin makes it ideal for offshore wind production, according to the paper.
CCUS, which is the practice of capturing the carbon dioxide released by industrial sources such as power stations and burying it deep underground, could also become a major aspect of North Sea activity, with wider collaboration across the energy sector.
Turning the Tide says infrastructure is already in place across the region that could be used to store the gas through depleted oil and gas fields.
It adds that the North Sea can play an important role in CCUS technology, which is regarded as a way of helping to reduce carbon emissions.
Further down the line, the North Sea could also play a major role in hydrogen production, storage and transportation.
This could be achieved either by converting natural gas into hydrogen or through electrolysis that uses offshore wind-generated energy, says the report.
PwC UK’s energy sector leader Drew Stevenson said: “There is a necessary urgency to move to a low-carbon world.
“As our report illustrates, there is huge potential for the North Sea to play a significant role in the energy transition, setting a precedent for facilitating the move to a clean energy future.
“The appetite exists for the North Sea energy industry to play a significant role in the transition.
“Investor sentiment is rapidly becoming more committed to low-carbon technologies while smaller exploration and production companies are looking at ways to reduce the carbon footprint of their operations.
“All of this creates an opportunity for the North Sea to lead the way in the energy transition.”
Future funding for the North Sea
Turning the Tide predicts the emergence of private capital from developing countries is going to play a greater role in the funding of North Sea operators.
It claims that, as major players have reduced their production footprints in the North Sea, the likes of private equity-backed Chrysaor and independents such as Spirit Energy and Enquest have increasingly taken their place.
With private equity-backed companies expected to play a longer-term role in the UK than first envisaged when they arrived following the 2014 oil price downturn, the report suggests there will be future consolidation in the sector with larger independents acquiring smaller ones.
Stevenson said: “The North Sea needs to ensure it is economically attractive to ensure investment continues as we move closer to a low-carbon world.
“With price volatility and increasing concerns over the environment, businesses in the North Sea must illustrate how they are adopting new ways of working to mitigate the impact of their carbon footprints.
“They must do this while reminding observers of the ongoing importance of hydrocarbons through the process of reaching our net-zero ambitions.”
