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In recent months, Just Stop Oil protesters have lined the streets of central London, blocked entrances to petrol stations, blocked traffic on a major bridge in the UK capital, attempted to disrupt the British Grand Prix motor race and thrown tins of tomato soup. . Above Vincent van Gogh’s “Sunflower” at the National Gallery.
Since its formation in April this year, hundreds of its supporters have been arrested in Britain campaigning against the use of fossil fuels. But, far from stopping the protests, the cause has been further boosted by the UK government’s decision to grant a new wave of oil and gas exploration licences.
Under this program, the North Sea Transition Authority is expected to issue more than 100 permits to companies for oil and gas exploration on the continental shelf by the end of June. It will prioritize four areas in the southern part of the North Sea, where gas has already been discovered.
Opponents have indicated they will mount a legal challenge. Environmental group Greenpeace claimed the new licensing round was potentially “illegal” and indicated it would aim to block it in the courts. Climate campaigners have stressed that the UK government’s efforts to secure more oil and gas from the North Sea are at odds with the UK’s commitment to net zero carbon emissions by 2050.
The British government claims that maintaining North Sea oil and gas production is justified by Russia’s attack on Ukraine and the denial of gas supplies to Europe, which it says underscores the need for energy independence.
But experts say it is unlikely that any increase in oil and gas production in the North Sea will reduce prices in the UK, as they are determined by international markets.
Despite this, Offshore Energies UK, the industry trade body, argues that oil, gas and electricity still provide around three-quarters of the UK’s energy needs, so maintaining domestic production is essential to reduce reliance on imports. Last year, Britain imported 62 percent of its gas needs and 18 percent of its oil, according to an Offshore Energy report.
“The level of recent exploration activity in the UK continental shelf is below what is required to sustain reserves and meet UK demand,” says Mark Wilson, director of operations at Offshore Energy UK.
The UK still has 15bn barrels of oil-equivalent oil and gas reserves that could be tapped, the organization says. If £26bn of investment can be secured this decade, Britain will still meet half of its domestic demand for oil and gas by 2030.
However, while Offshore Energy says production can be increased, it also admits that, after 50 years of exploration, the North Sea is a shrinking field. Output is declining by about 5 percent per year and the deposits that remain are generally difficult to extract.
Even if fields adjacent to existing sites can be brought into production within months, new developments can take years to come on stream, so new licensing rounds are unlikely to reverse the long-term decline.
This has made the sector less attractive to major industry players, such as BP and Shell, who have opted to divest North Sea assets in recent years – leaving smaller players such as Aim-listed IOG and Neptune Energy, hungry to increase production.
Andrew Latham, an analyst at Wood Mackenzie, says there are only “modest” opportunities in the North Sea and he doesn’t see much scope for that to change. “There are occasions where there are surprising discoveries, but they are unlikely,” he notes.
Global upstream oil and gas investment has fallen from $700bn a year since 2014 to $400bn a year and “is not going back”, says Latham.
The UK’s windfall tax on oil and gas explorers could also deter UK investment, he says, although that has largely been offset by generous investment tax relief, which rewards companies with an overall saving of 91p for every £1 they commit.
The shift to renewables means there is less certainty about the duration of demand – and that affects the appetite of big oil and gas developers to pump resources into the continental shelf. “If you’re not sure how much oil and gas will be needed, you don’t want to invest,” Latham explains. “A lot of the message is that fossil fuels are not needed.”
Ultimately, they are counterproductive, says Simon Retalec, director of the Carbon Trust’s Net Zero Intelligence Unit. They point out that the International Energy Agency has also warned that expanding oil and gas exploration could significantly set back the transition to renewable energy, threatening the UK government’s net zero targets. Prioritizing renewables will deliver a cleaner, greener energy system, make the UK more resilient to global shocks in oil and gas prices and deliver more jobs to support UK growth,” says Retelac.
But, until the UK can develop significant storage that can cope with the break between wind and solar power, there will be demand for gas and oil.
The best solution, Latham suggests, is to cut down on the need for more fossil fuels, for example by insulating homes better, rather than targeting supplier companies. “If you’re really going to focus on reducing emissions, you need to focus on demand – so the decision by activists to protest at petrol stations and on roads is interesting, because it puts pressure on everyone,” he says. .
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