By Dr Daria Shapovalova (Law School) and Professor Tavis Potts (School of Geosciences), University of Aberdeen
The news of Shell’s withdrawal from the proposed Cambo oil field in the North Sea has been greeted with welcome by the climate movement and concerns in the oil and gas sector. The oil giant has said its decision was driven by the economy, but in reality, it’s a symptom of growing public awareness of the urgent emissions cuts needed to meet Paris Agreement goals.
The final decision on development is imminent, having sparked accusations of hypocrisy towards the UK government in its role as host of COP26, and recently aroused opposition by the Scottish Prime Minister, Nicola Sturgeon.
Discovered in 2002, the field is located 25 km northwest of the Shetland Islands. It contains over 800 million barrels of oil and is majority owned by Siccar Point Energy. When the exploration permit was first awarded, the UK had no climate change legislation and had yet to ratify the Kyoto Protocol. Today, the government’s Oil and Gas Authority (OGA) must decide whether or not to grant a production license in the face of fierce resistance from environmental groups like Green peace and Friends of the Earth Scotland and the continuing public interest before, during and after COP26.
Cambo is it crucial for “meet British demand properly and with the best environmental performanceAs the industry maintains?
Or does it undermine the UK’s image as a global climate leader without responding to local pressures in the North East?
“Sudden stop” or managed phase-out?
Many commentators point to the importance of keeping oil and gas workers employed, especially amid reports of outsourcing renewable jobs overseas. Having a clear timeline for phasing out production and strong support for training can help transfer skills to the current and future workforce. Both UK and the Scottish governments have made plans to support oil and gas workers by funding training opportunities, but some still rightly think “neglected and inaudibleâ.
Managing expectations is one of the most difficult parts of this conversation. Some forecasts are flying for the future UK offshore energy workforce, which will grow to over 200,000 jobs by 2030 in a diverse sector led by offshore wind and with the assumption (optimistic) that oil and gas workers will all move towards renewable, low-carbon industries like hydrogen. and carbon capture, use and storage (CCUS).
This projection must be balanced by sobering employment statistics in sectors such as offshore wind which have been described as a “failure to capitalize on potential opportunities for changing the supply of offshore wind” by the Scottish Trade Union Congress. Careful planning, political support and social protection will be needed to advance a just transition in this context.
Clear timelines and action plans are needed for the phase out of the UK oil and gas industry. The country’s net zero target for 2050 is supported by carbon budgets, reporting, careful planning and an independent climate change committee. While the Scottish Government set up a Just Transition Commission in 2019 and some work is ongoing, there are conflicting political goals in the OGA’s strategy. Maximizing the economic recovery of North Sea oil and gas while pursuing ambitious climate goals will continue to create uncertainty in the years to come.
The OGA has pledged to establish a “climate compatibility checkpoint” for new licenses to ensure compliance with broader climate goals, but has yet to release details. Climate Checkpoints are not a witch hunt against the oil and gas industry, which has a role to play in a just transition. The expertise, human and financial capital and existing infrastructure are crucial for the development of sectors such as hydrogen and CCUS.
However, the refusal to put in place concrete timelines and climate assessment criteria – and what that means for future operations – brings no certainty to the industry or to investors. Likewise, sudden and drastic measures can lead investor-state disputes, where fossil fuel companies can seek compensation for the disruption of their economic activities.
(in) energy security
Arguments around the need to meet domestic demand with new oil and gas projects may be easier to make now, as the headlines are filled with warnings of shortage of natural gas. The need to avoid imports is often used as a global response to any call for a gradual reduction in production.
Even in net zero compliance scenarios, the UK will still need oil and gas, but estimates vary. The Climate Change Committee’s Balanced Net Zero Pathway predicts a significant drop in demand by 2050 for oil (-85%) and natural gas (-70%). More ambitious scenarios, assuming “considerable success in both innovation and societal / behavioral change” predict an even more dramatic drop in demand.
What is less clear is how domestic production rates will be managed with declining demand. In 2019, oil and gas produced in the UK met 59 percent of demand, reaching 71% last year as Covid-19 reduced our consumption rates. Recent IEA appeals on limitation “No new fossil fuel supply projects” and scientific studies calling for a annual decline in oil gas production of 3% set the global tone for production and climate commitments.
It is also important to note that crude produced in the UK does not often pass through UK based refineries to UK customers. Over the past 5 years, despite being a net importer of petroleum, the UK exported 81 percent of crude oil extracted and about 40 percent of refined petroleum. In 2020, 39 million tonnes of oil were exported mainly to the Netherlands, Korea, Germany and China, part of which is re-imported into the UK in the form of refined petroleum products. In the same year, about the same amount was imported, mostly crude from Norway and the United States.
The global nature of the oil market is not a threat to energy security, but the lack of diversity of domestic sources is. True energy security can only be achieved with a multitude of affordable, sustainable and reliable energy sources, in which renewable energies will play a key role until 2030 and beyond. A variety of sources and scenarios for demand projection data does not help clarity and helps push the agenda on both sides of the debate.
The argument that âif we don’t develop this oil, someone else willâ does not hold water for a country aiming to be a global climate leader. In the words from an Australian judge, Brian Preston: “If a development causes an environmental impact that is deemed unacceptable, the environmental impact does not become acceptable because a hypothetical and uncertain alternative development could also cause the same unacceptable environmental impact”.
Cut both supply and demand
Cambo is the first of many oil fields whose fate is to be decided in the years to come, some of a larger size. Accepting that demand will decrease significantly requires recognizing that supply must do likewise and decisions on which projects to carry out must take into account our climate commitments and considerations of social benefits and impacts, including employment and public revenues.
Between hosting COP26 and efforts to pursue a just transition, the days of climate closure for Scottish and British politicians are long gone. It’s time to start having honest and difficult conversations about when and how the phase-out of production will take place and what supportive measures need to be in place today to protect the most vulnerable in the inevitable downfall of production. net zero saving.