Energy Transition Outlook 2019

TR & NSITION ENERGY

Energy Transition Outlook 2019

Pathway 2: Developing a World-leading, Low-carbon Offshore Oil and Gas Industry

The second pathway focuses on the reduction of the sector's own emissions. UKCS environmental performance has improved significantly in the last 20 years in terms of CO2 and other emissions. But a step-change in technology deployment is required to work towards the 2050 goal which implies significantly lower levels of emissions per barrel of oil and gas equivalent produced.

Oil and gas will continue to be part of the energy mix up to and after 2050. However, it is expected that most gas will be consumed in decarbonised form, while oil will be used more sparingly for feedstock and for some energy uses, and being offset by other economic changes such as land use. To be compatible with a net-zero UK and meet the targets framed in the CCC recommendation, the emission intensity of oil and gas production will fall significantly to 2050. In 2018, UK offshore oil and gas production resulted in 14.6 million tonnes of CO2 equivalent in 2018, around 3.5% of the UK’s total emissions. Industrial businesses, including oil and gas producers, already have strong incentives to reduce their emissions due to increased EU ETS compliance costs. During 2019, operators paid up to €28/tonne of CO2 released. Higher CO2 prices in future are likely, which will further incentivise the decarbonisation of operations.

A collective approach is needed to meet the expectations of society and achieve emissions reduction on a large scale, industry needs to be able to focus on action which will result in the greatest benefit to environment whilst maintaining environmental performance and compliance efficiently. Institutional investors are increasingly looking to see all types of businesses align with the Paris agreement and this includes reporting on their emissions profile. For any business, GHG emission can be characterised into three groups (“scopes”) as defined in the Greenhouse Gas Protocol.7 The GHG Protocol methodology was endorsed by the Task Force on Climate Related Financial Disclosures (TCFD).

7 The Protocol was established by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).

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