Towards Net Zero: The OGA Plan

The NSTA has, for the first time, introduced an OGA Plan, setting out its views as to how the UKCS oil & gas industry should meet the obligations in the OGA Strategy that require relevant persons to carry out their regulated activities in such a way as to assist the UK government in meeting the target of net zero carbon emissions by 2050. In particular, it outlines the steps that the NSTA thinks are necessary to continue reducing greenhouse gas emissions from oil and gas production, continuing the NSTA’s focus on reducing the emissions from production activities as far as possible.

The OGA Plan is significant because, in terms of paragraphs 18-20 of the OGA Strategy, regulated companies are required to comply with it or satisfy the NSTA that alternative approaches nonetheless meet their obligations under the OGA Strategy. 

The status of the Plan

Section 9A of the Petroleum Act 1998 (as amended) created for the UKCS offshore industry a “principal objective” of maximising the economic recovery of UK petroleum, in particular through development, construction, deployment and use of equipment and offshore infrastructure and collaboration amongst those involved in the industry.  It also required the production of a strategy to enable the principal objective to be met; in terms of section 9F of the Petroleum Act 1998 (as amended) the strategy must be reviewed and updated every four years.  Both the regulator (the North Sea Transition Authority (“NSTA”), previously the Oil & Gas Authority (“OGA”)) and those companies it regulates must comply with the strategy. 

The first revision of the strategy was undertaken in the course of 2020, so that in February 2021 a revised version, the OGA Strategy, came into effect. The OGA Strategy reflected the growing government and public focus on net zero by including a new second limb in its Central Obligation requiring the UKCS oil and gas industry to carry out regulated activities in such a way as to assist the UK Government meet its target of net zero carbon emissions by 2050, in particular by reduction of greenhouse gas emissions such as flaring and venting, power generation and carbon capture and storage projects.  Supporting obligations were added or updated in the OGA Strategy to support that new requirement.  The OGA Strategy also provides, at paragraph 18, that the OGA may produce a plan setting out its view of how any of the obligations in the OGA Strategy must be met.  Regulated companies should comply with such a plan; if they choose not to do so, then they must demonstrate to the NSTA’s satisfaction that their alternative approach meets the OGA Strategy obligations.

The NSTA has now, for the first time, introduced an OGA Plan with which the industry must comply.  This is directed at emissions reductions, reflecting the NSTA’s continued focus on requiring the industry to ensure that emissions associated with petroleum production are as low as possible.

Who does the Plan apply to?

The Plan applies to "relevant persons", which are defined in the Plan as being:

• Holders of petroleum licences;
• Operators under petroleum licences;
• Owners of upstream petroleum infrastructure;
• Persons planning and carrying out the commissioning of upstream petroleum infrastructure; and
• Owners of relevant offshore installations.

The Requirements under the Plan

The Plan sets out specific requirements that relevant persons must comply with (or satisfy the NSTA as to their proposed alternative approach), focusing on investment and efficiency; electrification and low carbon power; inventory; and flaring and venting.

1. Investment and efficiency

Relevant persons were already required (by paragraph 13 of the OGA Strategy) to deploy, develop and invest in emission reducing technologies and procedures where appropriate. The Plan now requires relevant persons to produce an Emissions Reduction Action Plan (“ERAP”) for each asset that summarises areas where emissions can be monitored and reduced, as well as identifying technologies and other opportunities that may assist with this. The ERAP must be implemented promptly for each asset over a reasonable timescale.

The Plan also expects relevant persons to achieve substantial emission reductions, which should be reported into the government’s Environmental and Emissions Monitoring System (EEMS).

Any future investment proposals to recover new resources should also be accompanied by a commitment to reduce emissions in the asset's ERAP.

2. Electrification and low carbon power

The NSTA considers that power generation is the largest contributor of emissions from UKCS oil and gas production, and that increasing electrification and low carbon power options is a crucial step towards reducing these emissions.

The Plan places different requirements, depending on a development’s first oil date:

• There is a requirement for all new developments with a first oil or gas date after 1 January 2030 to be either fully electrified or run on alternative low carbon power with near equivalent emission reductions.
• New developments, excluding tie-back developments, with a first oil or gas date that falls before 1 January 2030 should, at a minimum, be electrification ready.
• All assets (whether current or new developments) that will continue to produce beyond 1 January 2030 are required to include in their ERAP a comprehensive technical and economic assessment of full and partial electrification.

Further to this, before submitting their Field Development Plans (FDPs) or FDP Addendums (FDPAs) Concept Select, relevant parties are required to provide a thorough technical and economic assessment which identifies all feasible electrification schemes and the associated emissions reductions alongside these – the NSTA expects to prefer the lower emissions option.

The Plan also places an obligation on relevant persons to make financial investments to electrify all assets where it is reasonable to do so, assessed by means of a comparison between a risked value of remaining reserves and the expected reduction in emissions from electrification against the cost of electrification. If the NSTA considers that it is reasonable to electrify an existing asset, but relevant persons fail to do so, those relevant persons are warned that they should have no expectation that the NSTA will approve FDPs or FDPAs, or issue any future decisions that give access to additional hydrocarbon resource on that asset. However, the Plan has allowed for other low-carbon power methods to pursued if credible evidence can be provided that near equivalent reductions in emissions will be achieved.

3. Inventory

The Plan refers to analysis indicating that closing low producing installations could help to reduce overall UKCS emissions by allowing cleaner new production to begin instead. The Plan makes clear that the NSTA will take active steps to ‘manage out’ older, high emitting assets with low production in favour of permitting new developments with lower emissions. 

In order to do this the NSTA will use emission levels to flag assets which would benefit from having a more detailed follow up discussion around its emission level. If the emission intensity of an asset that is due to produce beyond 1 January 2030 is 50% over the average UK offshore emissions intensity, this may result in relevant persons having to agree to an earlier Cessation of Production (‘CoP’) date, although steps taken to reduce emissions and the significance of a particular asset in the context of the region where it is located (for example, its potential to support tie-backs for cleaner production) will also be taken into account.

Relevant persons will be required, via the annual UKCS Stewardship Survey, to declare COP dates and report against delivery.  Going forwards, these will be considered to be ‘fixed’ dates and the NSTA will generally expect them to be met and for decommissioning planning and activity to be carried out in line with these.

4. Flaring and venting

Flaring and venting create a substantial level of emissions during oil and gas production. The NSTA’s flaring and venting guidance already indicates that there should be zero routine flaring and venting for all developments by 2030.  This guidance is now underpinned by a requirement in the Plan that all assets have no routine flaring and venting by 2030, and that all new developments should be designed on the basis of no routine flaring and venting,  In order to achieve this, as of 1 June 2024, relevant persons are required to provide a documented method of the split of projected flaring and venting figures by category (routine, non-routine and emergency) with any flare and vent consent applications.

As from 1 June 2025 relevant persons are also required to, within their ERAPs, have plans and associated budgets to deliver continuous improvements in flaring and venting leading to emissions reductions.

Comment

The Plan places very significant requirements on the oil and gas industry to make significant and intentional efforts to reduce the carbon emissions associated with oil and gas production and outlines specific steps which the NSTA expect the relevant persons to take in order to achieve this. The NSTA has indicated, however, that it expects to implement the Plan in a reasonable way, so as to avoid unintended consequences from a strict application of the express terms used and it remains to be seen to what extent there will be any scope for discussion with the NSTA in respect of the best approach to take for a particular asset.  Meantime, it will be important for companies falling within the MER UK regulatory regime to familiarise themselves with these new requirements and any corresponding deadlines and ensure timely compliance to avoid the consequences for those that do not follow the requirements under the Plan.

Article prepared with assistance from Soha Ahmed, trainee solicitor in our Energy Disputes team.