Foreign control of North Sea oil licenses could endanger UK plans to achieve net zero emissions, a study has warned.
Research shows state-backed fossil fuel companies and private equity firms are grabbing oil from the North Sea, raising concerns about the government’s ability to cut fossil fuel production and reduce fossil fuel production. ensure a “just transition” for workers.
The Common Wealth think tank study finds that more than a third of North Sea license blocks now have majority private or public ownership, with fossil fuel companies from China, Russia and the Middle East playing a role. increasingly dominant role.
Unlike the oil majors, many of these companies are not subject to public scrutiny, are not accountable to shareholders, and are not required to have the same level of corporate governance as large listed companies.
Campaigners say this is potentially ‘catastrophic’ for UK plans for a swift and fair transition to a low-carbon economy, despite efforts by the Oil and Gas Authority (OGA) to put the industry in step.
“A revolution is underway in the North Sea,” said Mathew Lawrence, director of Common Wealth. “Who owns the UK’s oil and gas assets is changing dramatically and with that, how we ensure a fossil-free future. “
In recent years, oil majors such as BP and Shell have started to withdraw from the North Sea, leading to a sharp increase in the number of private equity firms and state-backed firms, which could raise significant amounts of money. new challenges for the sector regulator. In 2010, the collective share of production by private companies in the North Sea was only 8%, but it rose to 30% in 2020, according to data from Rystad Energy.
Lawrence said: ‘With these businesses generally less transparent and insulated from public pressure, this shift raises pressing policy questions about the kind of tools we need to ensure a just transition away from fossil fuel production in the UK. United. Dealing with the climate emergency is likely to require a return to democratic control and planning over the UK’s natural resources. “
The OGA was created to help the North Sea “maximize economic recovery” of the basin’s remaining oil reserves. However, under a recently revised mandate, he is now charged with reducing emissions from the North Sea and helping the industry transition to a net zero carbon future.
“With the OGA now having an obligation to help achieve the UK’s net zero target, it is essential that, as ownership changes, strong regulatory oversight and action enables a transition just for the industry, ”Lawrence said.
Many environmentalists fear the regulator has failed on the swift action needed to tackle emissions over the next decade. but the total emissions from the oil basin each year remain as high as the carbon produced by a coal-fired power plant.
The UK government’s new licensing round for North Sea oil and gas wells included up to £ 16 billion in joint government-private sector investments. Leading climate negotiators fear this could undermine the government ahead of a vital UN summit, Cop26, which the UK is hosting in Glasgow in November.
An OGA spokesperson said its recently updated strategy requires oil and gas companies to operate “in a manner consistent with net zero ambitions.”
“We make the industry responsible for emissions reduction targets and energy transition commitments. The British Continental Shelf (UKCS) is subject to one of the strictest regulatory systems in the world, ”he said.
Other countries, including Denmark and France, are suspending investments in the production of new fossil fuels, and in May, the International Energy Agency said that the exploitation and development of new oil fields and gas must cease this year if the world is to stay within safe heating limits.
The Common Wealth report highlights the involvement of several large public entities in the North Sea, including the Korea National Oil Corporation, the Norwegian company Equinor, the China National Offshore Oil Corporation, the Russian company Gazprom and the Abu Dhabi National Energy Company (TAQA).
Among the private companies involved is Ineos, the chemical company owned by one of the richest people in the UK, Sir Jim Ratcliffe. Others include Neo Energy, Tailwind, and Siccar Point.
Siccar Point is the majority owner of the Cambo oil license near the Shetlands, alongside oil company Shell, which is the subject of an ongoing legal battle over plans to explore additional reserves to expand the project. Greenpeace has threatened to take legal action against the government if it approves the plans after promising to end new oil exploration licenses that do not match UK climate targets.
A government spokesperson responded, “As we work hard to lower the demand for fossil fuels, there will continue to be demand for oil and gas over the next several years. “