The Secretary of State for Business, Energy and Industrial Strategy (Kwasi Kwarteng)

Today I am delighted to announce a landmark agreement between the Government and the oil and gas industry—the North sea transition deal—to support the industry’s transition to clean, green energy and secure future of high-skilled oil and gas workers and the supply chain. This follows our commitment to securing a deal in the 2019 Conservative party manifesto and is the first of its kind to be agreed by a G7 nation.

In the energy White Paper, we have committed to work with industry to make the UK continental shelf a net zero basin by 2050. The oil and gas industry will have a critical role in maintaining our energy security through this transition. Domestically produced gas still met approximately 46% of the country’s supply of gas in 2019 and the Climate Change Committee forecasts our continued need for fossil fuels for years to come.

The North sea transition deal between the UK Government and the oil and gas industry will support workers, businesses, and the supply chain as it transitions to a net zero future by harnessing the industry’s existing capabilities, infrastructure, and private investment potential to exploit new and emerging technologies such as hydrogen production, carbon capture, usage and storage and offshore wind—as well as offshore decommissioning.

Through the deal, the oil and gas sector and the Government will work together over the long term to deliver the skills, innovation and new infrastructure required to decarbonise North sea production, as well as other carbon-intensive industries. Not only will the deal support existing companies to decarbonise in preparation for a net zero future, but it will also attract new industrial sectors to base themselves in the UK, develop new export opportunities for British businesses, and secure new high-value jobs.

Delivery of the new green industrial revolution will require a strong partnership between the Government, regulators and industry. This deal sets out a template for that partnership and includes an ambitious plan to meet stretching greenhouse gas emissions reduction targets. The deal aims to support and anchor the expert supply chain that has built up around oil and gas in the UK, to both safeguard and create new high-quality jobs.

Joint Government and industry investment of up to £16 billion by 2030 to reduce carbon emissions. This includes up to £3 billion to replace fossil fuel-based power supplies on oil and gas platforms with renewable energy, up to £3 billion on carbon capture usage and storage, and up to £10 billion for hydrogen production.

A 60Mt reduction in greenhouse gas emissions, including 15Mt through the progressive decarbonisation of UKCS production over the period to 2030 1 .

Support for up to 40,000 direct and indirect supply chain jobs in decarbonising UKCS production and the CCUS and hydrogen sectors.

Today’s announcement delivers on the Prime Minister’s 10-point plan and builds on our ambitious energy White Paper, which set out how the Government would support the decarbonisation of offshore oil and gas production while promoting opportunities for the sector to transition to clean energy.

To aid the transition to a green economy, today’s package follows the recent Budget in which the Chancellor committed to funding that targets the oil and gas sector and supports businesses to develop green energy. This includes up to £27 million for the Aberdeen energy transition zone to transform the area into a green energy hub and up to £5 million additional funding for the global underwater hub based in Aberdeen to open up opportunities for the city to become a global hub for underwater engineering, including in offshore wind and hydrogen—further supporting the creation of green jobs and helping the transition to net zero.

We committed in September 2020 to reviewing policy on licensing for North sea oil and gas to ensure it was compatible with our climate change objectives. This included assessing whether licensing for new oil and gas exploration and production should continue in its current form, as well as the scope for formalising any aspects of our existing processes to provide additional assurances.

Noting the ongoing role of oil and gas on our path to net zero, the Government will introduce a new climate compatibility checkpoint on future oil and gas licensing rounds to ensure they are compatible with wider climate objectives, including net zero emissions by 2050. This checkpoint will use the latest evidence of the time, looking at the UK’s demand for oil and gas, the sector’s projected production levels, the increasing prevalence of clean technologies such as offshore wind and carbon capture, and the sector’s continued progress against its ambitious emissions reduction targets.

This balanced approach will make the UK an even stronger and more credible international partner to the growing number of countries who are seeking to make the transition to a cleaner future. The UK will build on the implementation of the policy shift by working with likeminded partners to make similar commitments, including through our G7 and COP26 presidencies.

1 The 60Mt also includes emissions savings from CCUS and hydrogen already set out in the PM’s 10-point plan.

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