Energy Transition on the UKCS - two critical reports published

United Kingdom

Introduction

August saw the publication of two documents which will have a significant bearing on developments in the oil and gas industry in the next decade, and which are closely related. The Department for Business, Energy and Industrial Strategy (BEIS) published a response to its consultation on re-use of oil and gas assets for carbon capture, usage and storage (CCUS) projects while the Oil & Gas Authority (OGA) published its final report on UK Continental Shelf (UKCS) energy integration.

The BEIS consultation response can be found here and the OGA’s energy integration report here.

Context

Carbon Capture Usage and Storage (CCUS) is likely to be essential if the UK is to meet its obligations under the Paris Agreement and the net zero target under the Climate Change Act. In order to deploy CCUS at scale in the UK a network of infrastructure will need to be developed to transport and permanently store carbon dioxide (CO₂) offshore. The re-use of oil and gas assets has the potential to significantly reduce the cost of development of that network and its carbon footprint. BEIS states “Whilst the exact value of these cost savings is uncertain, upfront capital costs savings for some projects could be in excess of £100 million compared to the costs to construct new pipeline infrastructure.” The OGA in its energy integration report suggests that re-use of existing infrastructure could save 20-30% of the capital cost for selected CCUS projects. There are also potential benefits for oil and gas owners and operators, including opportunities to maximise the economic life of their assets, and to potentially reduce or transfer decommissioning costs.

The government has been working closely with industry to evaluate potential business models for CO₂ transport and storage. In 2019 BEIS launched a consultation on CCUS business models alongside the consultation on the re-use of oil and gas assets for CCUS projects. (The response to the CCUS Business Models consultation was also published last week and our Law-Now on that document can be found here).

The aim of the BEIS consultation on the re-use of oil and gas assets was to help facilitate the deployment of CCUS at scale by identifying the existing opportunities and barriers to the re-use of infrastructure for CO₂ transport and storage while the OGA’s Energy Integration Project, which began in early 2019, has explored how different offshore energy systems (oil and gas, renewables, hydrogen and carbon capture and storage) could be co-ordinated across the (UKCS) for environmental and efficiency gains, including identifying technical, regulatory and economic hurdles.

Read our full article here for fuller details of the issues addressed in these reports.