As Britain’s political parties court voters ahead of the coming federal election with pledges to increase energy security and cut bills, the country’s offshore oil and gas sector will continue to decarbonize under the North Sea Transition Deal, no matter who wins power.
The U.K.’s North Sea oil production has been declining over the past few years, and Britain’s North Sea Transition Authority – which regulates the oil and gas, offshore hydrogen and carbon storage industries – expects that trend to continue. March, 2024, forecast figures on its website have production falling from about 1.6 million barrels of oil and gas a day in 2020 to 1.1 million this year and 740,000 by 2029.
British Prime Minister Rishi Sunak announced a major reversal of his government’s environmental policies in September, rolling back climate measures while promising that Britain will still meet its target of net-zero greenhouse gas emissions by 2050. One week later, Britain gave the go-ahead for one of its biggest new oil and gas projects in years, and a recent analysis by Rystad Energy forecast that 2024 will see the sanctioning of the highest number of new projects in a decade.
But any projects that come to fruition will be brought in under the North Sea Transition Deal.
The agreement is, at its core, a quid pro quo arrangement between the offshore oil sector and the British government, in which industry brings production to net-zero with the assistance of government subsidies and programs, thereby helping Britain meet its broader emission reduction targets.
Created in March, 2021, it was born of the recognition that the oil and gas industry would be critical in ensuring the U.K. delivers on its net-zero goals. That’s why it was developed by the sector working hand-in-hand with government, said Emily Taylor, the North Sea Transition Deal program manager with Offshore Energies UK, an oil and gas industry association.
“It’s [a] combination of commitments for the sector to do – and for government to do,” she said in a recent interview from the OEUK offices in Aberdeen, Scotland.
Despite Mr. Sunak’s move to roll back environmental policy, the deal was introduced under a Conservative government, and there remains a consensus across the political spectrum regarding the importance of decarbonization and addressing climate change.
The deal has five key areas or, as Ms. Taylor calls them, “the ingredients for net-zero”: hydrogen, carbon capture and storage, infrastructure, decarbonizing oil supply and ensuring the country has the people and skills needed to fill the jobs it will need in the future.
Various industry groups oversee the deal to ensure the sector makes progress, and a larger steering group keeps the broader net-zero goal in focus at all times.
Like Canada’s own plan to reach net-zero, it also includes intermittent targets: halving emissions by 2030, cutting them by 90 per cent by 2040 and hitting net-zero by 2050.
By March of this year, the sector was sitting at about a 24-per-cent reduction in sector emissions – proof that the deal works, Ms. Taylor said.
“It’s a blueprint, a plan for industry to get behind to deliver on our net-zero ambitions.”
Canada’s Natural Resources Minister, Jonathan Wilkinson, likes that the deal enables industry-government collaboration when it comes to decarbonization and creating new economic opportunities.
“I think that it would be a very useful thing for Canada and Canadian provinces to have something along those lines,” he said.
But he acknowledges that it’s unlikely, given that Canada’s oil and gas sector is a very different beast than Britain’s in the North Sea.
For starters, Canada’s is spread across the country, and provinces have control of their natural resources, not the federal government. That means an overarching deal would require many layers of government co-operation in negotiations with industry and, indeed, agreement between Ottawa and the provinces.
“I am always interested in talking to industry, but it’s difficult in Canada to have those conversations without some discussion with the province, because the province is the resource owner in a way that it is not in the United Kingdom,” Mr. Wilkinson said in a recent interview.
There’s also a very practical difference in terms of the resource itself.
While British oil production in the North Sea is stagnant, Canadian production is far from slowing down. In fact, the oil sands in Alberta’s north set a production record in December. And the completion of the Trans Mountain pipeline system expansion means companies are pumping as much crude from the ground as they can.
“From our perspective, oil and gas in Alberta isn’t going anywhere for decades. The North Sea is obviously in a situation where it’s depleting and more quickly than other jurisdictions,” said Brian Jean, Alberta’s Energy Minister.
Then there are the political challenges.
Alberta and Ottawa frequently butt heads over energy policy, including the province’s stand on a federal cap on emissions from the oil sands. Alberta has its Emissions Reduction and Energy Development Plan, but it contains no interim targets, and Premier Danielle Smith says that’s not going to change any time soon.
“If Alberta was to come forward with a climate plan that actually had interim targets, that was also an economic plan, then this kind of a mechanism, in some shape or form, I think could work,” Mr. Wilkinson said. “But it starts with actually having something to shoot at.”
And federal Conservative Leader Pierre Poilievre has been unclear about his party’s commitments to climate change and industrial carbon pricing, Mr. Wilkinson said, which has driven uncertainty for the oil and gas sector.