Economic Report 2018


The recent establishment of, and subsequent report from, the Carbon Capture, Usage and Storage (CCUS) Cost Reduction Taskforce 6 , has provided a new focus on the opportunities for this technology in the UK. This will be essential to provide the gateway to the hydrogen economy and the diverse, low-carbon energy mix required for the long-term commitments of the Climate Change Act. The UK oil and gas sector has the necessary infrastructure, an experienced workforce with relevant skills and is well placed to support the development of CCUS. The development of the government Pathway Document in the second half of 2018 and the policy framework in early 2019 will give further opportunity to explore the contribution of the sector to this essential technology.

The UK oil and gas sector has always been a pioneering industry which, at every stage, has shaped the nation’s energy journey. The further development and acceleration of the Energy Transition will be no exception.

3.4 Brexit The management of the UK’s exit from the European Union (EU) continues to provide uncertainty within the market, with the future trading relationship yet to be determined. At the time of writing the UK has not yet agreed a deal over the future interface with the EU for customs, trade, access to shared energy markets or movement of goods and people. The UK Government’s ‘ Future Relationship Between the United Kingdom and the European Union ’ white paper outlined its preferred position on the future trading relationship with the EU. On customs specifically, the white paper confirms the UK’s plan for a ‘Facilitated Customs Arrangement’ (FCA), which will aim to minimise constraints on the trade of goods, through the creation of a new UK-EU free trade area underpinned by a ‘common rule book’. As is the case with other industries, the UK oil and gas industry values stability and certainty, and there is concern that the current uncertainty around the UK’s future trading relationship with the EU could result in a negative impact on business and investor confidence. • Fresh opportunity, where the UK is free to negotiate international trade deals and has minimal EU tariffs. In this scenario there is the potential for a fall in current oil and gas industry trading costs by around £100 million per year. • Reverting to World Trade Organization (WTO) rules, where there is the potential for the cost of trading for the oil and gas industry to increase by around £500 million per year. Given the challenges around attracting new investment seen by the oil and gas industry in recent years, additional costs such as those envisioned in a possible ‘hard Brexit’ scenario would be potentially detrimental to the ongoing international competitiveness of the UKCS. Analysis commissioned by Oil & Gas UK in 2017 modelled the impact of two potential Brexit scenarios:

6 file/727040/CCUS_Cost_Challenge_Taskforce_Report.pdf


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