The UK's oil and gas sector needs to attract new investments for the country to balance its energy demand with transitioning to a lower-carbon future, an industry group said today.
OGUK said in its Economic Report 2021 that the UK attracted £3.7bn ($5.1bn) of oil and gas capital investment in 2020, the lowest since 1973. It estimates that around £3bn has been taken out of upstream spending plans in 2020-21 in response to the Covid-19 pandemic.
It said it "has visibility" of around £21bn to be invested in 2021-25, delivering 2.7bn bl of oil equivalent (boe) of hydrocarbon resources. But it said that only £6.6bn of that has been fully committed by companies.
"OGUK is clear that there is a continued need to invest in new oil and gas developments to ensure security of supply and a strong domestic industry upon which to build the low-carbon energy ecosystem of the future," it said. It called for "a managed transition", and said it "refutes the cliff edge approach being suggested by some as a symbolic gesture", noting that the government's independent climate-change advisers have said half of the UK's energy requirements between now and 2050 will still be met by oil and gas.
But climate activists question the need for more hydrocarbon output, emboldened by the IEA's declaration in May that the path to net zero by 2050 excludes any new oil and gas fields being approved for development. Environmental group Greenpeace is in court today to challenge the UK government's permission for BP to drill the North Sea Vorlich field, effectively seeking to stop production there.
Greenpeace said that if it wins this case, there could be implications for the Cambo field, which is awaiting the green light from UK's Oil and Gas Authority (OGA) and that has become a focal point for environmentalists ahead of the UK hosting the UN COP26 conference in November.
OGUK highlighted that as production falls, demand will be met by imports. It said that UK hydrocarbon output fell by 11pc year on year to 1mn boe/d in the first quarter, and said: "in the first few months of 2021, the UK has imported more gas than any other year, as demand rose, and domestic production fell."
"And while renewables have made inroads in supporting electricity generation, that electricity still only accounts for 20pc of the UK's total primary energy needs," it said.
In particular, the industry is banking on oil and gas output becoming lower-carbon through means such as the electrification of offshore installations. Highlighting the advantage of the basin as a near-infrastructure one, OGUK estimates that some 95pc of oil and gas prospects offshore the UK are "within 45km of a hub currently in production or coming online within the next 10 years".
OGUK estimates that the oil and gas industry supports almost 200,000 jobs in the country. A recent report on workforce transferability, conducted by Scotland's Robert Gordon University, found that most of these roles are suited to a switch into low-carbon energy sectors.
