Richard Cockburn, partner and energy sector head at law firm Womble Bond Dickinson, examines the deal and explains why he’s confident it will be a success.
The UK government is certainly saying a lot of the right things when it comes to climate strategy and decarbonisation. The publication of the North Sea Transition Deal (NTSD) in March was a huge step in the right direction.
It sets in stone the net zero measures to be taken by the oil and gas industry in the UK, outlining new "checkpoints"; that will be inserted into the licensing process to ensure compatibility of new oil and gas projects with the UK's climate objectives.
Combined with emission reduction targets for the industry of 10% by 2025, 25% by 2027 and 50% by 2030 plus confirmation of support for carbon capture, utilisation and storage (CCUS) and hydrogen projects in the UK, this constitutes a measured response to the energy transition challenge.
Not only is it measured, we feel it’s realistic: the NSTD was agreed in conjunction with the industry so the target is a product of joint working and is therefore something that most within the sector are on board with.
This sets a standard for a transition to a more sustainable green economy so we can rebuild whilst supporting the many communities reliant on the industry, seeking to preserve thousands of jobs and protecting businesses and their supply chain.
The sector deal between the UK government and oil and gas industry looks to leverage the industry’s existing capabilities, infrastructure and private investment potential to exploit pioneering new technologies like hydrogen production and CCUS.
The deal seems to be a good balance between seeking emissions reduction whilst recognising the reality that oil and gas is needed from the North Sea for several years yet to meet energy demand, an assessment confirmed when looking at forecasts from bodies such as the International Energy Agency or the UK's Climate Change Committee. Besides, oil and gas is also important for the production of a range of other products such as plastics.
The UK oil and gas sector, which is largely based in Scotland, North East England and London, will support the UK government's 'levelling up agenda', promoting innovation, infrastructure and new skills necessary for the decarbonisation of North Sea production.
The deal is excellent news as the UK prepares for a net zero future by 2050 and has huge potential to attract new investment and to support a number of sectors including technology and manufacturing.
The NTSD was soon followed by more promising news this spring, in the shape of an open letter to UK businesses, co-signed by Rishi Sunak and Kwasi Kwarteng. This pledged that plans for economic growth would, over the next 12 months, be followed by an Innovation Strategy, as well as strategies for net zero, hydrogen and space, all positioned as part of our transition to net zero.
The UK government also says it will develop a vision for high-growth sectors and technologies, putting the UK at the forefront of opportunities and giving businesses the confidence to invest, boost productivity across the UK and enable our transition to net zero.
Words, we know, are easy, and the failure of the UK government’s Green Homes Grant, launched in late 2020 and shut down by early 2021, shows that good intentions can quickly fall by the wayside.
However, the involvement of industry with the NTSD fills us with confidence that it can be a success. Womble Bond Dickinson’s energy team has been immersed in the energy and natural resources sector for decades, giving us great depth of experience across the various different forms of energy and power. This experience allows our energy lawyers to identify the best routes through the complex issues that affect companies operating in the sector.