Environmental Audit Committee
Oral evidence: Accelerating the transition from fossil fuels and securing energy supplies, HC 109
Wednesday 7 September 2022
Ordered by the House of Commons to be published on 7 September 2022.
Members present: Philip Dunne (Chair); Duncan Baker; Sir Christopher Chope; Barry Gardiner; James Gray; Helen Hayes; Ian Levy; Caroline Lucas; Cherilyn Mackrory; Jerome Mayhew; John McNally; Claudia Webbe.
Questions 303 to 372
Witnesses
I: Andy Samuel, Chief Executive, North Sea Transition Authority; and Hedvig Ljungerud, Director of Strategy, North Sea Transition Authority.
Written evidence from witnesses:
North Sea Transition Authority
Witnesses: Andy Samuel and Hedvig Ljungerud.
Q303 Chair: Good afternoon and welcome to the Environmental Audit Committee for our penultimate hearing in looking at the acceleration of the transition from fossil fuels and securing energy supplies, which is an increasingly topical issue. We are joined today by members of the North Sea Transition Authority, who were due to join us in July, when the session was postponed because of the non-appearance of the then Secretary of State, for which I do not hold the North Sea Transition Authority responsible. We are very pleased to be joined today by Andy Samuel, Chief Executive, and Hedvig Ljungerud, who is the Director of Strategy.
I am going to start, Andy, by asking: why did you change the name of the organisation to North Sea Transition Authority earlier this year?
Andy Samuel: Thank you. It is great to be here today. It was to better reflect the depth and breadth of the work we do. For example, next week we will be receiving applications from industry for our first-ever carbon storage round. That was not reflected in the old name. We did a lot of work with other regulators looking at the North Sea as a key jewel in the crown for carbon abatement—it can take 60% of the carbon required to get to net zero by 2050—so that was our work and we felt that limited to just oil and gas did not reflect the broader contribution we want to make.
Q304 Chair: Could you characterise for us the process of the licensing? As the regulator, you are licensing new exploration and presumably you also have responsibility for overseeing the decommissioning commitments of oil and gas companies. You have undertaken licensing rounds 31 and 32 and the one that is imminent is 33. Could you give a sense of the scale of what is proposed for 33 and why it is there has been a gap between the 32nd round and the one that is about to start?
Andy Samuel: Sure. We basically start as soon as the previous round closes listening to industry and gathering areas of interest. We have had a number of nominations, but the gap—because we were doing licensing rounds every year—was because it was recognised that the Government wanted to put in place a climate compatibility checkpoint, so anything we do is subject to that and we are awaiting the results of that.
There are also strategic environmental assessments and the current one, SEA3, it is recognised that was done before the net zero legislation, so it is entirely appropriate that that was updated through strategic environmental assessment 4, so we are also looking forward to seeing that.
We will then issue the areas of interest and we will issue our guidance, which is technical, financial and some other matters. We will normally open the round for a period. Last time it was 120 days. We may make it a bit shorter this time. We will then get all the applications. We will look at them. We issue as part of the guidance our kind of evaluation criteria, which also includes emissions aspects, and then we will award the licences to the appropriate licensees.
Q305 Chair: In the last two rounds, can you characterise for us how long it has taken for licences that were granted to get into production?
Andy Samuel: Sure. We looked at this recently. We issued a report in 2018 that was looking at that question historically because we had had a push to get some very old particularly gas discoveries into production, some of which had literally been around for 50 years. That created an average of 28, which has been why—
Q306 Chair: Is that a licence that had been granted but not acted on?
Andy Samuel: Yes. Well, a discovery that had then been made but had not been produced because of various commercial issues. We are good at working with operators to unblock those, which we successfully did. These fields are now producing, but that meant that the average back then was 28 years, which was an anomaly. Recently, it is around five years from licence award to first production. That is what we have been seeing in the last couple of years.
Q307 Chair: How much of that is dependent on introducing infrastructure into a new area to allow finds to be—
Andy Samuel: What we are typically seeing is that the great majority of developments these days are tie-backs to existing infrastructure. That is good from an environmental emissions point of view. It is also good if one is interested in pace, which we are.
Q308 Chair: The new blocks that you are looking at for this year are extending the geography quite a bit further. I am no expert, but it looks from the map as though you are filling in most of the available blank areas of the ocean that have yet to be sold.
Andy Samuel: What we were doing previously was alternating mature and frontier areas, in the same way that our colleagues in Norway had been doing for a number of years. We have stopped doing that because we do not see the need to go into new frontiers. There is not industry interest either, so no, this is very much back into what we call the mature areas, but some areas, like the west of Shetland, yes, as you rightly say, there are quite large areas between existing infrastructure, so it is also filling in.
Q309 Chair: Are you in a position to say what your expectation is of how long the current round will take from award of a licence to productive assets flowing?
Andy Samuel: I would anticipate quite a spectrum. One operator drilled a well, made a discovery and got it into production on existing infrastructure in less than a year. That is possible, even from some of the blocks that we are going to be putting out because they contain existing discoveries. Potentially, it could be very quick. Others, if it is, like you say, in one of these areas but quite a distance from infrastructure, it could be more like five to 10 years.
Q310 Chair: Looking back at the most recent round—which I think concluded around the time of the general election in 2019—are any of those licences now in production?
Andy Samuel: I would imagine so, but I would have to get back to you with the detail.
Q311 Chair: I think one of the things that is of interest at the moment to the public is, if there are unexploited assets under the North Sea, how long it is going to take to bring them into use. If you have done any analysis on that, it would be very helpful if you could send that to the Committee.
Andy Samuel: We certainly will. We have done some analysis, so absolutely.
Q312 Chair: Thank you. Finally, from me, could you just give me a sense of the approval process? You have said you will have a window for applications to be made. How long does it then take before you allocate?
Andy Samuel: We would normally require around three months. It depends on the number of applications from industry, which we obviously don’t control. What we are probably going to do this time around is prioritise by tranche, the first tranche being those blocks that contain discoveries that could be brought on early, so we will work through in a prioritised fashion. There are other regulators. You mentioned decommissioning and OPRED is the decommissioning regulator. We just have a role on reducing cost, but it is also a part of that approval process.
Q313 Chair: Do you have any role onshore or is it all offshore?
Andy Samuel: We have a role onshore, as the licensing authority for onshore oil and gas licences. It is more of a regulatory role, whereas offshore we have a bit more of a policy role as well.
Q314 Chair: Onshore, if fracking were to be allowed again, is that something that would fall under your regulatory remit?
Andy Samuel: Under the current policy, we had a role not just around the licensing but also monitoring for the seismic events and being part of the operational system under the traffic light system. If that was changed, it may well be that we are asked to have a role going forward.
Q315 Chair: Do you have a view as to whether any of the licences that were granted for onshore fracking have recoverable reserves that would be commercially exploitable?
Andy Samuel: I have some experience from North America and what I would say in the UK is it is still early days. Typically, you have to appraise and work out where the good rock is. You have quite a spectrum from areas that are very unproductive to—if you are lucky—areas that are very productive, but you find that through appraisal. The appraisal requires hydraulic fracturing, so there is a process to go through but, yes, there is clearly potential. The BGS has evaluated the potential. What no one knows until you have properly appraised is what the economic recovery may or may not be.
Q316 Chair: That appraisal work has not been done?
Andy Samuel: It is very limited; it is very early. There has been about half a dozen appraisal wells so far.
Q317 Chair: Is the information from those wells publicly available or available to you?
Andy Samuel: Yes. We published some reports, including on the seismic events, because that was clearly in the public interest, so a lot of the data certainly are publicly available.
Q318 Chair: However, seismic events are different from recoverable assets?
Andy Samuel: Yes. Like I say, I think it is still too early to say what the recoverable assets are. You would need more data.
Q319 Chair: Perhaps you have not looked at this and it might be unfair to ask you, but are you aware of any fracturing wells on the continent that are producing economically?
Andy Samuel: I know that there was an appraisal programme in Poland, but I don’t think that was that successful. France has put in place a moratorium, which is the other area with some very good basins, so I don’t think there are an awful lot.
Q320 Caroline Lucas: Just to continue some questions to Mr Samuel, if that is all right. You will know that at COP26 the Government pushed for strong commitments to keep the 1.5 goal alive. Now they are expected to be giving the green light to a new round of oil and gas licensing, despite evidence from the UN that the existing global production gap could exceed the Paris Agreement goals. What estimates have you made of the scope 3 emissions that will be produced if the remaining reserves in the North Sea are extracted and burnt without carbon capture?
Andy Samuel: We are very concerned with everything we do to keep within the 1.5 degrees. We have analysed those reports in quite a lot of detail. Currently, we are forecasting—this is including future rounds—that gas will decline at 9% and oil at 6%, so that is steeper declines than the IEA or the UNEP called for. We are not a regulator for the onshore, the scope 3. We are an offshore regulator. I would love to talk about what we do on the offshore emissions, but we have said publicly that we see this as more of a demand issue, while there is still the demand.
We have evaluated the footprint of North Sea gas compared to importing, for example, through LNG and it is a two and half times lower footprint. At the moment we are seeing that our current forecasts, which includes new discoveries and rounds, suggests that we can provide 29% of the gas demand out to 2050, so there is a big gap.
Q321 Caroline Lucas: On the LNG I take your point that there is a smaller footprint, but where we get most of our gas from, which is Norway, there is a bigger footprint here in the UK, so I think it is important just to see those figures in the round.
I want to push you on scope 3 because I do not think it is enough for you to essentially say that that is not your business. I think it must surely be very much your business, because it is the business of everybody in oil and gas—and indeed in other industries—to make sure that as a country we keep below 1.5 degrees. I will come back to asking you, if you are not analysing scope 3, do you have some plans to analyse scope 3? Because I cannot see quite how you can play your role as a regulator without knowing whether or not the things you might be giving a green light to are about to bust through our legally binding targets.
Andy Samuel: To be clear, we provide all the forecasts, so we are constantly forecasting what the production will be, which feeds into others, but we are not the regulator for insulation. We are not—
Q322 Caroline Lucas: No, of course not, but, in that case, can you tell us what estimate you have made of the scope 3 emissions that will be produced if the remaining reserves in the North Sea are extracted and burned without carbon capture? I come back to my first question.
Hedvig Ljungerud: I take your point: they are extremely important obviously, and our starting position is the transition is vital, but the scope 3 are driven by demand. UK production does not drive UK demand. UK producers are price-takers globally, so the two are not really—
Q323 Caroline Lucas: No, I want to come back on that. You are technically correct, of course, that on one side you have demand and on the other side you have supply, but the two are interrelated. I do not think you can simply say that, “Because there is demand we are going to supply”. There is a responsibility on all players in this market to ensure that we keep below 1.5 degrees. Therefore, I will come back to the fact to say that. if you are not calculating scope 3, I think there is a responsibility that you should.
Andy Samuel: We publish, but we will very happily send you our year-by-year projections and then that can be converted into scope 3, absolutely. We look at that. That is the work I said we did when we were then comparing with the IEA and UNEP declines.
Q324 Caroline Lucas: Will you yourselves take into account the results of your own analysis of what the scope 3 implications are on decisions that you are making?
Andy Samuel: I think this is a policy matter for Government. Those are some of the things that presumably the Government will be looking at in the climate compatibility checkpoint.
Q325 Caroline Lucas: When it comes to measuring scope 3, do you agree that it is perfectly possible to do it, that there isn’t a technical difficulty in calculating scope 3?
Hedvig Ljungerud: I think there is a risk of double-counting. Of course, you can measure scope 3 emissions, but it is to try to assign them to several different sectors, because there is not a direct link. I think it is a little bit more than technical, the fact that it is not the UK production that is driving it. Supply is globally quite elastic. We know there are things that can be turned up and down more or less flexibly.
There are several regimes I would say globally that perhaps would not immediately take UK leadership and change their policy. I think scope 3 is super important—don’t get me wrong. I think the nation should be analysing them and thinking about demand. What we are saying is we are regulating the offshore production, which is not driving UK scope 3, so that is not our specific area.
Q326 Caroline Lucas: It is certainly very much bound up with UK scope 3. I just feel that it is very convenient for you to be able to make this distinction between supply and demand in quite the way that you are. It is interesting, what you have said about the fact that it is perfectly possible to calculate scope 3. When we had David Bunch in front of us at our last session—the guy from Shell—he was basically saying, “We would love to do it, but the methodology isn’t there”. Whereas, we know perfectly well that there are examples from the Greenhouse Gas Protocol standard, from IPIECA and from many others where there is a methodology that can be used. It is quite useful to have that on the record. I can see that Andy Samuel is nodding, so that is positive.
The Climate Change Committee has asked your organisation for more transparency on its projections for future production. Will you undertake to share the assumptions underpinning your projects with the CCC so that it is better able to assess the climate change impact of new licensing rounds?
Andy Samuel: We work very closely with the CCC. I think what it was asking for was to see how much of the future production was coming from new discoveries. In recent presentations we have deliberately separated that out, so hopefully that has been dealt with.
Q327 Caroline Lucas: Good. In that case, on that same subject I think earlier today there was a new report from Offshore Energies UK, which was using data provided by you. It says that 15 billion barrels of oil and gas is recoverable. Could you tell me what percentage of that is gas and how long would it last?
Andy Samuel: We would have to get back to you on the specific breakdown. I think it will be including our latest number in its expiration prospects. I think, from the top of my head, our latest number is 14.5 billion but we will get back to you with the details. It is probably around 70% oil and 30% gas, but we will get back to you. We can break it out by the different categories.
Q328 Caroline Lucas: That is quite important because obviously the focus is on gas. On the one hand, if you have a headline saying, “15 billion barrels are recoverable” and then we discover, first of all, that only 30% of that is gas. Secondly, do we know how much of that is technically and commercially recoverable out of that 15 billion?
Andy Samuel: We don’t look at it across the whole portfolio because things change so quickly, both with commodity price but also the cost of developing. What I would say on the oil is a lot of oilfields have associated gas, so they are quite important. Some of the biggest gas production comes from what would be called oilfields, so it is quite hard in the North Sea to disentangle the two.
Q329 Caroline Lucas: Your submission suggests that the decline in UK production is in line with the domestic carbon budget pathway set out by the CCC. Is it in line with the global assessments by the IEA and UNEP, which suggest that scope 3 emissions of additional oil and gas production will exceed 1.5?
Andy Samuel: That was my point, our decline rates of 6% and 9%, our analysis is steeper. Yes, I think we are one of a very few number of oil-producing countries that can say that.
Q330 Caroline Lucas: I am asking specifically about the IEA and UNEP. You will know that the IEA has concluded that there is no need for investment in new fossil fuel supply; the UNEP production gap report has made it very clear that global production plans would lead to about 57% more oil, 71% more gas in 2030 than is consistent with 1.5. Therefore, my question is whether or not future exploration in the North Sea is compatible with those.
Andy Samuel: The IEA, I think it is often talking about whole new basins. A new field in Brazil is equivalent to a whole basin in the UK. We are so mature, the kind of numbers we are talking about are de minimis on the global scale but they are still significant for the UK.
Q331 Caroline Lucas: The CCC would say that what the UK does have is a massive leadership impact, even if we did take what you are saying. That could be discussed, but, even if it were the case that the difference that we are making is marginal, there is a very strong argument that it undermines any kind of leadership that we are trying to show on the global stage.
Andy Samuel: If I may, on leadership, I think we have demonstrated that. Since we started this work, we have put net zero into our strategy. More importantly, we have worked with industry. We have reduced flaring by 41% in three years and that is now being exported globally so that the big fields in Brazil, North America, are taking North Sea lessons hard learned. I think that is global leadership, while we still need it, to find a way to do it with a lower carbon footprint.
Caroline Lucas: Surely not—
Chair: I am sorry, but we only have quarter of an hour and four more colleagues to get in, so I am going to move us on. Barry.
Q332 Barry Gardiner: If car manufacturers were saying that they had an ambitious strategy to reduce emissions and you found that that ambitious strategy depended upon the fact that nobody was going to be buying cars for a number of years and, therefore, emissions would reduce, but they hadn’t made their engines more efficient, would you think that they were lying to you?
Andy Samuel: My head is spinning with that question, sorry.
Q333 Barry Gardiner: Let me try to articulate it in your terms. You have said that you have an ambitious reduction target. That is for your scope 1 and 2 emissions, of course. We are talking about development and production emissions, not the scope 3, the actual end-use emissions that Caroline was talking about. You said you have an ambitious target. That ambitious target is 50% by 2030, but a large part of that ambitious target, in reducing the scope 1 and 2 emissions, depends on the fact that you think that there is going to be less production in the first place, doesn’t it?
Andy Samuel: Yes.
Q334 Barry Gardiner: Therefore, when you say, “We have an ambitious target” achieving that target does not simply depend on reducing the emissions that are coming from each platform, each development, each field. It comes from the fact that less development is going to be going on, less production is going to be going on, therefore less scope 1 and 2 emissions are going to be happening anyway.
Andy Samuel: If I may, I will break it out for you. There is the natural decline, which clearly helps. We are a declining basin. There is the great work we have been doing with industry on flaring and venting. I have already demonstrated 41%, which I think is something we should celebrate. There is then the very hard work on electrification, so this is clean power to the installations. This is major engineering, a lot of work, a lot of policy support. That is ambitious, to get all of that done, making a substantial difference by 2030.That is the bit that we would say is going to require massive effort. We have been working very hard the last couple of years and I think making good progress. We are making sure that any future big developments—
Q335 Barry Gardiner: Let me just analyse what you have said; I want to be quick because the Chair will want me to be. You said that, certainly, the fact that you are a declining field is going to help reduce those emissions.
Andy Samuel: Yes.
Q336 Barry Gardiner: You have said that you believe that the actions that have been taken are ambitious and you are hopeful of meeting your target of 50% reductions by 2030.
Andy Samuel: This is the Government’s target, agreed with industry under the North Sea Transition Deal. What we see—
Q337 Barry Gardiner: Yes. You, as an authority, have agreed it.
Andy Samuel: No, we were not part of that official process. We provide the data and what we have said to industry is we would like to see at least 50% and they should be aiming for 68%, in line with the Climate Change Committee.
Q338 Barry Gardiner: Indeed, the Climate Change Committee says that it is 68% and the target that you have set, which you are calling ambitious, is for 50%.
Andy Samuel: I think a 50% reduction would be a very good achievement.
Q339 Barry Gardiner: In a declining field?
Andy Samuel: Yes, because we can break it out for you, but the decline is probably around half of that.
Q340 Barry Gardiner: Therefore, you are achieving a 25% reduction?
Andy Samuel: We will get the full breakdown, but it is—
Barry Gardiner: From effort.
Andy Samuel: No, I—
Q341 Barry Gardiner: No, there is no point in shrugging our shoulders here, let’s be realistic. What is being achieved by change in practice, by moving to electrification, by stopping flaring?
Andy Samuel: Look, if we want to get detailed, it is well-known that with big fields you tend to get more efficiency, so trying to do the same but with smaller fields takes more effort. That is my point. The devil is in the detail and it is not a like for like, but we can take that offline and get you some more data. Our view, and the fact that industry are concerned about what they need to do to meet this, this is not a soft target in any way. As I have said, and I have said publicly—
Q342 Barry Gardiner: It is not a soft target, even though the deal comes with a get-out clause that says, “Whilst the commitments in this deal are undertaken in good faith, we recognise the wide range of uncertainties that may impact on delivery”?
Andy Samuel: You will have to speak to the Government for what they say. Like I say, we are advised, but we were not part of—
Chair: We will pick that up, Barry, when we have the Minister in front of us. Your final question, please.
Q343 Barry Gardiner: What progress have you made to electrify platforms so far and how many platforms do you expect to be electrified by 2030 under the plans that you currently have?
Andy Samuel: We have issued guidance that makes it clear how we want to go forward. For many of the bigger developments, operators have already committed to us—as they have gone through what we call “concept select”—that they will be future-proof for electrification. For example, in the west of Shetlands, they are engineering into the primary design of the platforms that they can be plugged straight in for electrification, which is big progress.
We have a group in the central North Sea, four of the main operators hopefully getting ready for concept select by the end of this year with their preferred concept to electrify a whole bunch of platforms in the central North Sea. We have a group in the Outer Moray Firth doing the same. We worked with the Scottish Government, and, on the back of that, it was announced just last month the INTOG, so this the—
Q344 Barry Gardiner: Sorry, Mr Samuel, I don’t like to interrupt you, but you are giving me instances; you are not giving me numbers. What I am asking for is: how many platforms do you expect to be electrified by 2030 under the plans? What percentage of the total platforms does that—
Andy Samuel: Until we have been through the concept select it would be more speculation than hard data, so I think it would be erroneous to give you data.
Q345 Barry Gardiner: When would you be in a position to do that?
Andy Samuel: It will vary by region, but we are hoping with industry by the end of this year we will have a much better idea of the way forward for the central North Sea, which is one of the key areas that we are focusing on.
Chair: Thank you. I am afraid we must move on because we are running out of time. Helen Hayes wants to pursue this.
Q346 Helen Hayes: Sorry—Hedvig, did you want to just come in on that?
Hedvig Ljungerud: Just to add quickly that our forthcoming emission monitoring report—the second one that we are publishing—we have electrification scenarios in that. It is not based on the kind of detail that Andy went through, but it is our best estimate of the different scenarios, the high, central, low, your classic kind of predictions. That will be published next week.
Q347 Helen Hayes: Sticking with electrification, is it within the scope of your power that all new platforms are fully electrified?
Andy Samuel: It is a good question that we are looking at internally. We hope that, having signed up to the deal, industry will deliver. We have been very successful influencing industry on many things in the past, so powers are very much a last resort, but as an example, throughout the lifecycle from licensing right through to decommissioning we have a number of checkpoints. Basically, it is very hard for industry to do something if it is not aligned with government policy, but we will be looking at what government policy is, for example, around the climate compatibility checkpoint.
Q348 Helen Hayes: Are you looking at whether you have the powers or not or whether it is appropriate to use them?
Andy Samuel: We have a range of powers. It is just how we might use them.
Helen Hayes: You think you could insist if—
Andy Samuel: Yes. Under our new strategy, net zero sits alongside the economic recovery. Therefore, this is clearly compatible with net zero and economic recovery. The kinds of things we would look at—just to help my colleague, who is looking a bit upset—are the economics: what is the cost of the electrification? What is the emissions reduction? What is the future price of carbon abatement? There are a number of factors that we have to look at.
Q349 Helen Hayes: There is surely a question about new installations, which is different from the economic argument around it, yes.
Andy Samuel: We published guidance on new developments in line with our strategy.
Q350 Helen Hayes: Insisting that they are electrified in order to prevent unnecessary future carbon emissions?
Andy Samuel: As an example, if it is a very short-lived development very close to an existing old infrastructure where it is not economic to electrify, we wouldn’t probably insist it was electrified.
Q351 Helen Hayes: In the latest progress report to Parliament from the Climate Change Committee, it is indicated that your current plans are not credible. How do you respond to those criticisms?
Andy Samuel: Can you say a bit more?
Helen Hayes: In the latest report to Parliament from the Climate Change Committee, it says it believes that a carbon reduction of 68% is feasible and that, in relation to reducing flaring and venting, low carbon hydrogen production, bioenergy and carbon capture readiness, you have no credible plans, and that, in relation to carbon capture in refineries, you do have credible funding and financial incentives and so on. For two out of those four areas you have no credible plans. On two of them, one is considered to be partially credible and the other one you do have credible plans. The question is how you respond to that criticism.
Andy Samuel: I work very closely with Chris Stark and his team—who do great work—and they have not raised this directly with me. The one area that they have raised is the 68% and therefore, as I have already said, we publicly say to industry that 50% is the minimum and they should be going to 68%. We have very credible plans on flaring and venting and they are delivering on carbon capture. I know they are very pleased with what we have done. They have told me they are delighted that we launched the first-ever carbon storage round.
Q352 Helen Hayes: There does seem to be mismatch there between what they are reporting to Parliament and what you are talking about.
Andy Samuel: I am not sure if they are talking about the broader government system, rather than specifically the NSTA. When it comes to carbon storage, for example, we are one part of quite a complex regulatory system.
Chair: Could I suggest that, if there is a discrepancy in the evidence we think we have and your position, perhaps you have a look at the criticism that has been made by the CCC and just drop us a line with your response on that?
Q353 Helen Hayes: That is perfect. My final question was just in relation to the continual revision of your plans to keep on driving up the target. What plans do you have going forward?
Andy Samuel: Ever since we published the net zero strategy, we have put out new guidance and we have started these annual emissions monitoring reports. The second one is coming out next week. We will be very happy to share that with the Committee. Vitally, I have met with all 30 operators individually and gone through their carbon reduction plans.
We issued what is called stewardship expectation 11. That has very clear guidance around our expectations of operators to be good net zero stewards. Therefore, on request, they all have to prepare for us their emissions reductions plans. You will see next week in the report that we have a couple of interactive dashboards. We would like to highlight individual fields and in due course we will name them, but operators will have time to respond with their plans because we think transparency in this area is very helpful.
Chair: Thank you, Helen. That is a good segue into Jerome Mayhew’s question.
Q354 Jerome Mayhew: Mr Samuel, we have heard about the voluntary plan that the industry has signed up to, to reach a minimum of 50% by 2030. It is quite backend-loaded, isn’t it? It is 10% by 2025, 35% by 2027 and then 50% by 2030. Can you give the Committee a flavour of the level of compliance with that voluntary agreement? Is the industry right behind it in delivering or are there some recalcitrant organisations?
Andy Samuel: They are largely. We cover this in the report that we will share with you specifically next week. That is one of our roles. We have a plot that shows our projections and how they are going to meet that, so we are confident in industry. The 25% target by 2027, they will definitely meet the 10% by 2025.
Q355 Jerome Mayhew: Are they ahead of schedule?
Andy Samuel: We have had a 21.5% reduction since 2018, but last year was an anomaly because of the pandemic. There was a big catch-up on maintenance, so a lot of the platforms were shut down for a long period through the summer. Therefore, we need to be a bit careful about claiming victory too early.
What I am looking at is how industry are going to do this year. We monitor it monthly, so what I can tell you is that the reduction is continuing very well on flaring and venting. Every month we have seen reductions relative to previous years.
Q356 Jerome Mayhew: Did I pick up in a previous answer that there are 30 operators that are involved in this or are there more?
Andy Samuel: There are more than 30, but the great majority of the emissions are down to those 30 operators.
Q357 Jerome Mayhew: Of those 30 operators, are 30 of them on schedule or are there some laggards?
Andy Samuel: For example, last year we saw reductions from 79% of them.
Q358 Jerome Mayhew: We are looking at 21% for a safe margin. It is roughly a fifth are not quite playing—
Andy Samuel: There are sometimes reasons year on year, so that is why we are working through the detail with individual operators. I think the question you had about the loadings is very interesting and that reflects the importance of the electrification. It is fair to say there is a variable appetite among some operators on electrification. Some people have publicly questioned the economics of it. Others have said very publicly they are doing it, come what may. That is where we see the biggest variation.
Q359 Jerome Mayhew: Are you publicising the appetite of those various operators? Are you releasing the information?
Andy Samuel: They do it for us in their statement.
Q360 Jerome Mayhew: Although this is a voluntary agreement, do you have powers to enforce it?
Andy Samuel: That is what we were discussing earlier. We have a variety of powers, yes. It is not our deal, but our strategy has the net zero so it would be under our strategy. Clearly, if the Government choose to make monitoring of the targets part of the climate compatibility checkpoint, that would be a signal that we would want to follow.
Q361 Jerome Mayhew: Like any organisation, you have hard powers and soft powers. One of the first powers you could go to would be the power of publicity, and to name and shame is the common parlance. You have not done that yet. Is there a reason why?
Andy Samuel: We benchmark probably now about 50 different key performance indicators and, historically, we have not published them by operator or by field. What we do once a year, as a minimum, is we get all the operators together and we share them among that group, so people can see who is in the top quartile and who is in the bottom quartile.
Q362 Jerome Mayhew: Why the privacy?
Andy Samuel: Because we want to give operators a chance to share lessons and improve themselves. We think it is—
Q363 Jerome Mayhew: Just to intervene on that, publicity does not prevent them from learning. It might encourage them to pay attention.
Andy Samuel: We agree with that to some extent as well. What we are planning to do on emissions, given the public interest, is look at publishing some of these dashboards. The data are in the public regime already. It is just hard to disentangle it, but we can help.
Q364 Jerome Mayhew: I am going to push a little bit harder on this. What is your resistance to publishing names and identifying organisations?
Andy Samuel: At the moment, we have been doing this for two years and we have been getting very good results, better than we expected. There is a question, why would we—
Q365 Jerome Mayhew: It is not uniform. If I have understood your answers correctly, the results that you have achieved have not been uniform. There is 20%-odd, some of which may have valid excuses, but there will be some that do not have valid excuses, so why are you not naming them?
Andy Samuel: At the moment my team are working very hard on this on a weekly basis. We are working with four or five operators that show up on some of our benchmarks in a bad way. We want to give them a chance to correct that. If they don’t, I think there is a very strong argument—
Q366 Jerome Mayhew: What is the timeframe for that?
Andy Samuel: We are talking here quarters, maybe even months.
Q367 Jerome Mayhew: If we were to talk you again in six months’ time, you would be in a position to decide whether you are not to name or shame?
Andy Samuel: Yes, we would.
Q368 Jerome Mayhew: You also made brief reference to publishing a league table. As I understood your answer, the league table is for the internal industry. Is that something you could consider publishing more widely and, if not, why not?
Andy Samuel: The concern is that not all fields are the same, not all installations. Therefore, I would expect a modern large gas field to have a far lower emissions intensity than a very large old oilfield with very little production. That is because we understand the detail and someone looking at it without that knowledge may draw the wrong conclusions. This is a very, very technical area.
Q369 Jerome Mayhew: I am going to move away from soft power into harder power sanctions that you have available. If you identify an oil or gas company that is failing to meet its production emissions targets, you are over your barrier about naming them, what further actions might you take or could you take?
Andy Samuel: We have already had one operator that was producing without the right consent, flaring, and we had to shut it down for a period until that was sorted out. Over the years, we have not issued production consents if it is not appropriate to do so. We have been using these. We had one operator come to us wanting to develop a field, but still to have non-routine flaring. It had no gas export line. We said, “We are not going to approve that development concept”.
We had another one and we thought an electric drive for compression rather than diesel was the right way forward. We asked it to look at that and it came back with a new concept. It then went further and said, “Now that we have looked at it, we think we can hook up an offshore windfarm and go further”. We are constantly working with industry to get lower carbon solutions for the oil and gas we need.
Chair: Final questions—briefly, if possible—from John McNally.
Q370 John McNally: My questions are basically on the governance of the North Sea Transition Deal and they are all to you, Andy. The North Sea Transition Authority has a mandate to secure the maximum value of economically recoverable petroleum and, also, to assist the Secretary of State in meeting the net zero target. There are organisations who argue this flies in the face of the scientific evidence. How is it possible to achieve both of these objectives, given that some of these reserves must remain unburned to meet the Paris targets?
Andy Samuel: We do not see the two as incompatible. We have done a lot of work on this. We can cover it through the detailed economics, where we hold industry to a test with a much lower discount rate and a much higher cost of carbon so that developments only go forward if they can pay the cost of carbon. If I give you an example, the work we have done on reducing flaring saved enough gas last year to provide gas for 130,000 homes, so it is like good safety. Good environmental performance is good business. We don’t put them in opposition because of the way that our strategy has been designed, but it is sophisticated. I wish it was simpler. It isn’t, but we do not think it is incompatible in any way.
Going further, the vital role we have on carbon storage, we can turn the thing around. The North Sea can take 78 gigatonnes of CO2. It is a huge resource, so that is why we have been putting a huge amount of effort into new areas like that. Then the whole hydrogen economy, but we need the reuse and repurposing of these assets. There are 100 pipelines that can be turned back into carbon storage pipelines, saving £7 billion. I guess what I am saying is: we look at the whole system and how we are going to get to net zero in the most efficient, quickest way.
Q371 John McNally: Yes, I agree with the size of the problem. That brings me on to the next question. We have heard concerns that there is not sufficient independent oversight of the deal. In fact, a response to a Freedom of Information Act request submitted by the climate campaign group, UPLIFT, suggested that in effect the deal was drafted by the oil and gas industry body, Offshore Energies UK. Do you think it is appropriate that it should produce the draft deal? Playing the key role in how you oversee, in my mind that seems a bit of a contradiction. It is fairly obvious that there seems to be a contradiction in there.
Andy Samuel: We basically supported BEIS on providing data and evidence as it was negotiating with industry. I was not in the loop on who did the drafting. However, I realised this was a question that was going to come up, so I did ask colleagues who said that it was in line with the way other sector deals were done at the time. I think the bit that we did, it was strongly recommended that these interim targets were put in, because we felt 2030 was quite a long way away to see real progress from industry on the emissions.
On the monitoring, we are very confident that we are independently monitoring. Hopefully, you will see this for yourself next week when we publish our second report. A lot of the data going into this is independently audited, so that is an incredibly robust process.
Q372 John McNally: I think you probably understand that, in the public’s eye, there is a perception that businesses and organisations marking their own homework is not the best way that this should happen. I will wrap up on the final question to Andy again. How much engagement is the Authority currently having with the unions in how to support this just transition to protect jobs and how they make that transition into another career?
Andy Samuel: My chairman and I, and my head of HR, like to meet with the unions frequently and we have had some really good meetings over the years. People like Jake Molloy, who you may know, and many others. Jake has a seat on the North Sea Transition Forum that I chair, the senior forum to discuss just transition and all the things we have been talking about. I think we are very aligned with their view on a just transition.
Chair: Thank you very much, Andy Samuel and Hedvig Ljungerud, for joining us from the North Sea Transition Authority today for this first panel.