Mon, Jun 17 2024 17 June, 2024

UK at high risk of fossil fuels litigation: experts

The UK Continental Shelf is at risk of significant fossil fuels litigation, due to a mismatch between promises and reality on net zero goals, conference delegates heard this week.

Doorway leading to the Great Hall of the Royal Courts Justice (Photo credit: Adobe Stock/Victor Moussa)

The UK Continental Shelf has the potential to become one of the most litigious oil and gas producing areas in the world due to a mismatch between promises and reality on net zero goals, as the country already faces missing its 2030 decarbonization targets, according to industry experts and leaders.

The UK is “potentially the most litigious basin in the world on ESG” amid a “misalignment between what assets are capable of doing and what we have promised to achieve,” according to an industry expert.

While he’s optimistic “targets can be met” there is a “large gap between aspirations and reality” partly due to the fact companies were not “set up to decarbonise, but to produce oil and gas” the expert, who does not want to be named, said in a speech at the North Sea Decarbonisation Conference in London earlier this week.

The UK is targeting achieving net zero emissions by 2050, in line with other major Western economies.

While the country “has first movers’ advantage as it signed the Paris Agreement (on Climate Change) early,” it is also facing the risk that companies are over-promising on what they can achieve, increasing the potential for future climate litigation.

One issue is that “as assets come towards the end of their life, the carbon intensity goes through the roof” making it more difficult to achieve decarbonisation targets, he said.

The radical changes required in the energy mix, with the deployment of new technologies also likely are going to lead to “volatile shifts in prices” which will in turn “lead to reconsider investing in some technologies” causing “supply chain issues,” he warned.

UK off-track on 2030 targets

Meanwhile, the UK is off-track on its 2030 decarbonisation targets of at least 50% emissions reductions against 1990s levels, according to Tom Wheeler, director of operations at the North Sea Transition Authority.

Power generation accounts for 80% of emissions in the offshore oil and gas sector in the UK and therefore “electrification of oil and gas platforms is key” in achieving targets, he said, speaking at the same conference.

Nonetheless, the offshore oil and gas sector has so far managed to halve flaring and reduce GHG emissions by 21% since 2018, he said, adding that the UK was on track to meet its 2025 and 2027 targets of reducing emissions by 10% and 25% respectively.

Oil and gas companies are also working on a multi-platform electrification solution for the Central Graben area – Central-North Sea electrification project, developed by Harbour Energy, Shell, TotalEnergies and BP – and the Outer Moray Firth – led by CNOOC – with final investment decisions expected in 2024.

These solutions would cover the majority of Central North Sea production, delivering significant GHG emissions reduction and have potential to be a catalyst to accelerate offshore wind growth via the Innovation and Targeted Oil and Gas leasing round, the authority said.

While the industry is faced with the challenge of “balancing three distinct objectives, energy security, reducing emissions and accelerating the transition,” hydrocarbons will continue to play “a valuable role in maintaining energy security,” Wheeler said.

Against that backdrop, the country is “actively considering new developments and licensing new exploration activities” in the North Sea.

The authority opened its 33rd oil and gas licensing round in October last year for 898 blocks and is currently assessing the 115 bids over 258 block and part-blocks it received. Awards are expected to be made later this year.

The issuance of new licensing rounds had been put on hold in recent years amid public pressure to shift away from fossil fuels, however the energy crisis of the past months has led to a shift in priorities with the UK now considering boosting its domestic output, despite concerns that this would not address supply issues in the short term.

Meanwhile, the NSTA announced on May 18 it had awarded 20 licences to 13 companies for CCS projects expected to store some 10% of the UK’s total annual emissions.

The facilities are located at sites near Aberdeen, Teesside, Liverpool and Lincolnshire among others.

The NSTA launched the UK’s first-ever carbon storage licensing round in June 2022, with applications closing in September.

It said some of the sites could become operational in six years time. However, the majority of projects will not come on stream until the 2040s, Wheeler said.

The announcement comes amid the Chancellor’s Budget announcement that the UK Government is allocating up to £20 billion in support of developing CCUS projects.

This first carbon storage licensing round is likely to be the first of many as up to 100 CO2 stores could be needed for the UK to meet the net zero by 2050 target, the NSTA said.