Can The UK Survive Without North Sea Oil And Gas?

NOT so long ago it was the lawyers and journalists who were the activists. How times have changed.

With the birth of the environmental movement and social media it now appears almost everyone is.

In many schools, where teachers embed man-made climate change and gender-fluid narratives, youngsters are seemingly encouraged to take up a cause.

Just Stop Oil protestors - a combination of these youngsters and their expensively-dressed grandparents - are a manifestation of this mono-thought mayhem.

The irony of the anti-fossil fuel protestors stopping the traffic, while adorned with the very petroleum-derived products they want banned is lost only on them.

The roots of this anti-fossil fuel activism are widespread but secured a firm foundation with the Intergovernmental Panel of Climate Change (IPCC) and its promotion of man-made Carbon Dioxide, from industrial processes, as the primary driver of a warming planet.

This was back in the 1990s and the solutions identified by the IPCC - and gestated for many years - now feature prominently in our everyday lives, through the Net Zero agenda.

Solar panels and wind turbines, air source, ground source and hydrogen heating solutions, electric vehicles and low-emission zones are never out of the news.

As a result of these measures the UK has become the first major economy to halve its emissions, since 1990. We produce less than one per cent of total, global emissions. 

Unreliable Energy Needs Storage

Despite the ongoing shift to the above, energy-dense oil and gas still meet three quarters of UK’s energy needs - it’s 80% across the rest of the world.

The magnitude of the task required to replace these hydrocarbons was highlighted in a recent Royal Society publication, authored by Oxford University Emeritus Prof Sir Chris Llewellyn Smith. (1)

The report entitled: ‘Large-scale electricity storage’ acknowledged the inability of batteries to provide the back-up needed for unreliable UK solar and wind.

It said the Government needed to immediately begin work creating ‘up to 90 clusters of 10 caverns’ to store green hydrogen to hit the Net Zero target by 2050.

Storing up to three million tons of hydrogen will not be cheap. Hydrogen is a highly flammable gas, and, as its small molecules escape easily three times the volume is required, compared to gas storage (2).

In a recent report former World Bank economist Prof Gordon Hughes said Net Zero would cost the British taxpayer at least 5% of GDP a year, between now and 2050. This will restrict expenditure on other public services at a time when the tax rate is at a multi-decade high. (3)

Questions have also been raised over the credibility of the Committee of Climate Change advice to Government after it suggested, in 2021, there were only seven days a year when wind turbines would produce less than 10% of their potential - in 2016 there were 78 (4).

With offshore wind and solar panels now commoditised by China, and most of the half-a-ton of rare earth minerals required for electric car batteries also, mainly controlled by the Chinese, the Labour Party is backing floating wind (5).

This is expensive, priced at £176 per MW/h in the latest Contracts for Difference round, it is more costly than offshore wind, which has a guaranteed price of £73 per MW/h. The current electricity price for the UK is around £65 per MW/h.

At a recent Offshore Energy UK (OEUK) event in County Durham Alan Dobson, of Tyneside-based FMC Technip, highlighted how developing and connecting floating turbines to the grid is ’super complex’ and will require standardisation to drive costs down.

Trade group, Aberdeen-based OEUK, formerly known as Oil and Gas UK, is embracing the energy transition with a focus on offshore wind and hydrogen, whilst also cautioning on the need to pace the transition effectively.

Energy, Not Just Electricity

In its 2023 ‘state of the industry’ report it says its members ‘cannot afford to invest in new areas without stable revenues from oil and gas projects’. 

The report says the UK needs to make the most of its remaining reserves. 

Speaking at the recent OEUK event in Durham its CEO David Whitehouse highlighted how the sector boosted UK economic activity to the tune of £20bn in 2023.

He said North Sea oil and gas can help suppress global prices and in some instances deliver gas to the UK at a 20% premium to our European neighbours.

Last year, the UK consumed energy worth 163m tonnes of oil equivalent (toe) whilst producing only around 100m toe, says OEUK.

This means the UK is now a net energy importer, despite usage falling by 30% since the turn of the century. Back then, the UK was a net energy exporter.

In the UK, domestic energy consumption accounts for around 40m toe, the transport sector is the most avaricious energy consumer with industry, services and agriculture making up the rest.

One of the primary - and often overlooked - issues by the Net Zero advocates is replacing hydrocarbons in these critical sectors.

Many industries require huge quantities of energy - delivered at extremely high temperatures - with oil, gas and coal capable of delivering that.

Alternatives being explored for powering the industrial heating and process industries include ‘green gases’ such as hydrogen, renewable dimethyl ether, and synthetic petrol and diesel.

But these will each require significant investment to reach cost-effective maturity, presenting these sectors with significant, Net Zero delivery challenges.

Replacing energy-dense oil as the main transport fuel will be a significant technical challenge, too.

Our Continued Dependence on Oil

At its peak, the UK oil and gas industry supported 500,000 jobs. This has now fallen to 200,000.

The equivalent of 47bn barrels of oil have been extracted over the last 50 years, with seismic surveys suggesting another 25bn remain, says OEUK.

With an election on the horizon the Labour Party is pushing hard on Net Zero electricity, saying it will refuse to grant any further offshore oil and gas licenses.

OEUK has warned this would wipe out North Sea oil and gas investment, (6) but some operators are still pressing ahead with their plans. 

Just weeks ago EnQuest began drilling at the Bressay and Bentley fields, 80 miles east of Shetland, with the two fields having the potential to produce 500m barrels of oil over coming decades.

The Rosebank field, which was approved last September after months of wrangling, is predicted to yield 350m barrels of oil. This was the the largest UK approval since 2016. 

Energy Bills On Upward Trajectory

In the last year solar, wind, biomass, and hydro have provided on average 40% of our electricity, with the cost of incorporating these evident in our energy bills.

In 2013, the environmental and network operating components of a duel fuel bill were around £400 a month, this has now almost doubled. 

In the US, which is now energy independent following the shale gas revolution, household energy bills are half those in the UK. 

The same is true for industry. The US economy grow by 2.5% in 2023; here in the UK growth has stalled and whilst this may be welcomed by the de-growth environmentalists it will leave any future Governments with a significant budgetary problem.

Labour says it will establish the state-run Great British Energy which it, unrealistically, says will make Britain a clean-energy superpower.

The Conservative’s meanwhile are looking to take the cost of renewables out of energy bills and fund them through general taxation. (7)

There are also moves afoot to introduce a surge-pricing system which effectively means those on lower incomes will not be able to afford to heat their homes or cook meals at times of peak energy demand. (8)

£60bn Subsidies or £400bn Revenues?

While the renewable energy industry received around £60bn of subsidies since 2015, the oil and gas industry has delivered £400bn to the UK Treasury in the last 50 years (9 & 10).

Elsewhere, in the developing world for example, the Net Zero agenda does not feature so prominently in discussions.

Over a billion people in sub-saharan Africa are still to benefit from the fossil fuel-inspired, standard-of-living revolution experienced by ourselves over the last 200 years, as was highlighted by Saudi Aramco CEO Amin Nasser, last month (11).

He elaborated on how the demand for hydrocarbons has grown by almost 100m barrels per day of oil equivalent since the turn of the century, going on to say the ‘hopes and ambitions of eight billion energy consumers around the world are at stake’.

And, he concluded that the energy transition narrative will increasingly be written by the Global South, with ‘peak oil and gas unlikely for some time to come, let alone in 2030’.

Back in the UK, and the rest of Europe, our lack of energy security was exposed in 2022 with the spike in energy prices following Russia’s invasion of Ukraine.

With conflicts breaking out across the world the military will be concerned if it has to rely on charging points for its drones, warships, planes and battle tanks to protect our national interests.

Over in the energy-independent US, Donald Trump has said that if elected President he will encourage the expansion of the hydrocarbon industry, coining the phrase ‘Drill, Baby, Drill’.

Here, in the energy-insecure UK, if the Just Stop Oil activists and Net Zero zealots get their way, we will be facing winters where we ‘Chill, Baby, Chill’.

ENDS

References

1. https://royalsociety.org/news/2023/09/electricity-storage-report

2. https://dailysceptic.org/2023/10/03/batteries-will-not-solve-renewable-energy-storage-problem-says-royal-society/?highlight=The%20Royal%20Society%20batttery

3. https://www.thegwpf.org/content/uploads/2024/03/Hughes-Financing-Energy-Transition.pdf

4. https://www.telegraph.co.uk/politics/2021/10/23/net-zero-target-relies-rise-windy-days/

5. https://www.bbc.co.uk/news/business-68654098#:~:text=Labour%20is%20planning%20to%20invest,energy%20bills%20and%20create%20jobs

6. https://www.energyvoice.com/oilandgas/north-sea/547554/oeuk-labour-windfall-tax-plan-would-wipe-out-north-sea-investment/

7. https://www.telegraph.co.uk/business/2024/04/01/claire-coutinho-axing-4bn-green-levies-electricity-bills/

8. https://www.telegraph.co.uk/business/2024/04/16/new-smart-meters-surge-pricing-function-government-plans/

9. https://www.theguardian.com/environment/2023/mar/09/fossil-fuels-more-support-uk-than-renewables-since-2015

10. https://assets.publishing.service.gov.uk/media/655cfc9e544aea0019fb3207/_8254__Oil_and_Gas_Fiscal_Review_-_Summary_of_Responses_FINAL.pdf

11. https://www.realclearenergy.org/articles/2024/04/04/conflict_of_energy_forecasts_saudi_aramco_vs_international_energy_agency_1022803.html

The Journal Newspaper Newcastle

Much of my recent work has been published in The Journal newspaper, which is based in Newcastle
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Let's make clean energy cheap

WHICHEVER country has the cheapest energy will get the best jobs and at the moment that is the United States as a result of its shale oil and gas revolution.

This has slashed energy bills, will help make the US energy independent, and has created one million new jobs with a further two million expected.

In a recent World Energy Outlook, the International Energy Agency warned that Europe could lose a third of its global share of exports from energy intensive industries because of price disparities between it and the US.

This is particularly relevant to the North East, which is the only net exporter in the UK, with many of these goods made by the energy-intensive process industries on Teesside.

But many of these companies – representing 30% of the region's industrial base – face energy price rises of up to 30% by 2020 and 50% by 2030, as a result of the UK’s green policies.

There are also concerns over the security of the UK’s energy supplies with businesses facing potential blackouts as early as this winter, due to the loss of significant quantities of baseload, fossil fuel power in place of intermittent renewables.

Steve Holliday, the chief executive of the National Grid, last week warned the UK will have to tailor its energy use to the weather.

Speaking to the Daily Telegraph he said that historically, energy users had "expectations that the supply will always be there" to meet maximum demand.

But "with renewables in the world in which we are moving towards" this would no longer be the case as it would make more sense to shift energy demand to times when the wind blows or the sun shines.

"We have to get used to a world in which when power is cheap we use it, when power is expensive we find a way of not using it," he said.

This seems like a backward step in an advanced economy and is one of the reasons why we need to get on fracking for shale gas. The Royal Society, British Geological Survey, WaterUK and Public Health England all says it’s safe.

Gas has 50% fewer carbon emissions than coal and can act as a low carbon bridge to a less carbon intensive future, alongside nuclear power, energy from waste and renewables, in particular solar.

Last month two close environmental and liberal allies of President Obama, former senators Tim Wirth and Tom Daschle, called for the whole treaty framework of mandatory emissions limits to be scrapped in favour of a greater focus on energy innovation and adaption.

This makes sense. We have to find a way to replace dirty energy technologies with cleaner ones, and develop low carbon technologies that can broadly scale without the need of costly subsidies.

We will have to eventually wean ourselves off fossil fuels but the top down policies we currently have are out of date.

They were drafted when we thought we had reached peak oil, but that has now been overtaken by the shale revolution and we need to enter a new era of climate pragmatism.

Peter McCusker, Energy Writer

Follow Peter McCusker on Twitter @mccusker60

Scots' go-it-alone vote hitting North Sea investment

THE looming Scottish independence ballot has been affecting investment in the oil and gas industry for over a year, says one of the industry’s leading lights.

Dennis Clark, OBE, chairman of Newcastle fabricators the OGN Group said: “The oil company chief executives don’t like risk and that’s what they see in the North Sea now.

“Will the assets be nationalised? Will the tax situation change? Will management and resources move away from Scotland? These are any one of a million things that could happen.

“Regional managers in the oil companies just can’t answer these questions so oil chiefs would rather spend their money elsewhere, Angola or Brazil, or shale.

“This is already happening; capital is migrating out of the North Sea and into shale. This uncertainty is damaging the industry.”

Cark the former chief executive of Amec Energy is honorary president and founder of NOF Energy.

Clark soundings follow similar comments from many in the industry including BP chief executive Bob Dudley

For more on Dennis Clark, and the energy industry see: http://www.thejournal.co.uk/authors/Peter_McCusker

15-year contract demands damaging offshore wind industry

SIEMENS became the first offshore wind turbine manufacturer to confirm it plans to set up a base in the UK when it announced it was establishing a blade manufacturing base in Hull, creating 1,000 jobs.

In recent years four of the world’s other main turbine players have signalled their intent to establish factories at UK ports, however none have yet committed, with the length of leases required said to be a major drawback.

Industry insiders say that many of the turbine companies want leases of no more than five years, but the ports, which will have to make substantial investments in berths and other infrastructure, need a 15-year timetable to make it work for them.

One industry expert said: “The strike prices have been set, and the Government wants local content in the supply chain. But the turbine manufacturers looking at building factories in the UK are being put off by the length of leases they are being asked to sign.

“If it was a five-year lease that wouldn’t be a problem, but a 15-year lease is, and if the market does not develop in the way expected this would add insult to injury.

“While the Government has shown its commitment to renewable targets up to 2020, there is no visibility beyond then.”

Associated British Ports has agreed to invest £150m upgrading its port facilities as part of the Siemens deal, although details of the length of lease agreed between the two parties has not been released.

For more on offshore wind and the energy sector see: http://www.thejournal.co.uk/authors/Peter_McCusker/

Senior UK renewable's boss says offshore wind costs can be halved.

MAJOR efforts are underway to reduce costs in the offshore wind sector with the UK Government saying it aims to see a 50% cut in subsidy levels from 2020 onwards.

DONG Energy is the largest player in the European offshore wind sector and Benj Sykes, its operations director for renewables in the UK, believes it can almost halve costs.

He said: “The industry is under increasing pressure from the Government to show it can bring costs down which may explain why a number of schemes have fallen by the wayside in recent months.

“Building a supply chain will help bring costs down. We believe we are capable of bring costs down by 30 to 40% to £100 per MW/h. In fact DONG wants to go further and is looking at 100 Euros per MW/h (or £80 per MW/h).”

Offshore wind subsidies are currently £155 per MW/h, which is three times the wholesale price of electricity, with the costs being passed on through household and business electricity bills.

Sykes added: “We are currently trialling 8MW turbines and these will drive down the costs. The industry needs to earn the right to exist on a large scale.

“There are still uncertainties, but we are pretty confident. If we show as an industry we can get our costs down then the opportunity is there for the taking, but we have to earn the right to grow as an industry.

“We can create a big industry here in the UK for foundation and turbine manufacturers and the supply chain.”

ENDS

For more on offshore wind and the energy sector see: http://www.thejournal.co.uk/authors/Peter_McCusker/

Fracking opponents should consider the facts.

DURHAM University is currently leading the biggest European-wide project of its kind into the risks associated with fracking for shale oil and gas.
In partnership with other national and international bodies, including Newcastle University, its ReFINE (Researching Fracking in Europe) project aims to create a library of independent research to help inform public awareness of the relative risks associated with the industry.
Its findings are being published in thirteen languages including Arabic, Chinese, Portuguese, Spanish and French.
This research is timely as earlier this week David Cameron said. "We're going all out for shale. It will mean more jobs and opportunities for people, and economic security for our country."
Cameron is keen to see the UK replicate the United States where the shale gas has led to a two-thirds fall in the price of natural gas helping businesses and households slash fuel bills.
The Government wants to see around 40 exploratory UK wells drilled by the end of 2015 – and its commitment has this week seen French oil major Total invest the UK shale industry.
On the other hand last year’s protests in Balcombe, Sussex, indicate the strong feelings of those against further fracking in the UK – and it has been banned in some countries including France.
To date ReFINE has published papers on the risks of water contamination and earthquakes, with further papers coming on well integrity, disposal of fracking fluid and gas emissions.

Earthquakes

Simon Bowens, North East and Yorkshire regional campaign coordinator for Friends of the Earth, said: “We know that fracking can trigger earthquakes. The only test-fracking to date in the UK in Lancashire in early 2011 triggered earthquakes. We need to know more about how it happens.
“But we also need to know about the impacts, not just above ground but also below ground. The Lancashire earthquakes distorted the casing around the fracking well. Such problems can increase the risk of leaks of methane and polluted wastewater, threatening groundwater.”
A spokesman for the United Kingdom Onshore Operators Group (UKOOG), which represents shale gas companies, said: “Once hydraulic fracturing commences, real time seismic monitoring will be used to operate a traffic-light warning protocol under which operations will be halted and pressures immediately reduced if a seismic event of magnitude greater than 0.5 above background seismic activity is detected.  This magnitude is well below the energy level that could be felt at the surface.”
Durham University, through its world-renowned Energy Institute, has researched hundreds of thousands of fracking operations and found that the process only caused earth tremors that could be felt on the surface in three places (including Preese Hall, Lancashire in 2011).
Its findings for the ReFINE project say the size and number of felt earthquakes caused by fracking is low compared to other manmade triggers such as mining, geothermal activity or reservoir water storage.
It went on to say the energy released in a fracking event is usually “roughly equivalent to, or even less than, someone jumping off a ladder onto the floor”.
Prof Richard Davies of Durham University, who is leading the ReFINE project, said the claims that the Lancashire earthquake had distorted the well-casing were unproven, saying such incidents are not uncommon.
He said: “The incident in Lancashire was most likely caused by fracking close to an existing fault.
“We are starting two new research projects as part of ReFINE to look into how close to a fault it is safe to drill and which faults in the UK should be avoided because they could shift if fracking occurred near to them.”

Water contamination

The ReFINE research has concluded that it is "incredibly unlikely" that fracking at depths of 2km to 3km below the surface, where most operations take place, would lead to the contamination of  the shallow water aquifers which lie above the gas resources.
Bowens said: “Water contamination from fracking is routinely denied by the industry and its supporters, but evidence from the US suggests problems.
“US authorities investigated complaints of polluted groundwater near the town of Pavillion, Wyoming and came to an initial conclusion that this was likely to be the result of fracking – but then decided not to complete the investigation.”
Prof Davies said: “Fracking is not the cause of the contamination. In Pavillion the wells were not cemented effectively.  So it’s not the fracking itself but often the other associated operations that need to be focussed on.”
A spokesman for the UKOOG said: “Shale gas formations are typically found much deeper underground than conventional oil and gas sources. In the UK, hydrocarbon extraction will therefore be taking place at a depth sufficiently distant from groundwater to ensure that the possibility of any fractures extending into aquifers is negligible.”

Disposal of Fracking fluid

Fracking operations require between 10 to 40m litres of water (equivalent to between four and 16 Olympic sized swimming pools) although in the major Texas shale plays this is still less than that used by either golf courses, power generators or households.
The fracking fluid is made up of water and sand with 0.5% chemicals. Around one third of this returns to the surface with the shale gas where it can be treated with fresh water on site and used for another well, or transported for treatment and disposal in permitted deep injection wells.
There are more than 50 known chemicals that may be added to the water including acids and nitrates. Such chemicals avert microorganism growth, prevent corrosion of metal pipes, and maintain fluid viscosity.
The remaining water stays underground in the shale formation.
A spokesman for the UKOOG said: “Wastewaters are stored in closed metal tanks before being treated in accordance with strict environmental regulation as used extensively across many industrial processes.
“Wastewaters are considered to be an extractive waste and so are regulated under the Mining Waste Directive. This requires operators to formulate waste management plans that identify how wastes are to be minimised, treated, recovered and dispensed of.”
Bowens said: “There are strong suspicions that many contamination cases have been settled out of court with confidentiality clauses banning homeowners from saying anything. We need independent analysis that cuts through the industry’s weasel words.”
Richard Davies said: “If fracking is ever to be used on a large scale in Europe research must be conducted into effective and efficient ways of dealing with flowback water.”
Flowback water also picks up natural contaminants from underground such as radioactive Radium-226 and the ReFINE project will look at the potential concentrations of these compared to other fossil fuels and the nuclear industry.

Air pollution from wells

Bowens said: “Air pollution from fracking wells can pose a health risk, as research from the US again shows. Public Health England recently said that there was a low risk of health impacts, while admitting that there was little evidence. But lack of data doesn’t mean an absence of harm.
“Air emissions don’t just pose health problems. The methane that the fracking aims to produce is a very powerful greenhouse gas. If large amounts of methane escape to the atmosphere rather than being captured, then any claimed climate benefits of gas over coal can be reduced or eliminated. Monitoring in the US shows those levels of these ‘fugitive emissions’ could be significant.”
UKOOG highlight that methane is a natural product of hydrocarbon fields, it contends emissions are not significant and say venting, the process, where gas is burned, will not take place in the UK when a well has started producing.
The ReFINE project highlights there is no existing consensus on the amount of fugitive emissions.

Drilling and completions

One area of keen focus for the ReFINE projects is the integrity of the wells.
Prof Davies says that if the UK shale industry gathers momentum hundreds of wells will be drilled every year.
Durham University has discovered that since onshore drilling began in the UK over a century ago two-thirds of the 2,000-plus drilled wells cannot be found.
Prof Davies said: “Steel corrodes and cement cracks. Once the wells have been completed who will check them? We have an opportunity to up our regulatory regime.”
A spokesman for the UKOOG said: “When all of the oil or natural gas that can be recovered economically from a reservoir has been produced, the land is returned to the way it was before the drilling operations started.
“Wells will be filled with cement and pipes cut off 3 to 6ft below ground level. All surface equipment will be removed and all pads will be filled in with earth or replanted. The land can then be used again by the landowner for other activities, and there will be virtually no signs that a well was once there.”
Bowens concluded: “The UK needs a national debate before deciding whether fracking for shale gas is the answer to the UK’s energy problems. Key to this national debate is accurate, unbiased information and the ReFINE initiative can help provide this. But we need answers to other vital questions, and also critically a Government that hasn’t made its mind up already.”
Ends
Follow Peter McCusker on twitter @mccusker60


What is Fracking?
Fracking or the hydraulic fracturing of rock – to release its gas or oil - has been taking place in the UK for over 100 years.
The key to the shale gas revolution has been the ability of shale companies to use the horizontal drilling techniques from the oil industry to penetrate shale layers many miles from the drill pad.
Previously a vertical drilling process would have only been able to extract reserves from rocks around 100ft out from the well.
The technique itself uses water, sand and chemicals to break up rock deep underground to release oil and natural gas.

Ends