It is now nine months since I tabled a proposal to replace offshore licensing rounds with bespoke "infrastructure-led permits" that would meet Labour’s manifesto pledge yet reignite domestic oil and gas production in the UK Continental Shelf (UKCS).
The inconvenient reality is the UK still relies upon oil and gas to meet three quarters of its total energy needs. It also depends upon gas for over 50% of its electrical baseload on cold, dark, windless winter days, and we required gas for around 30% of our power needs last year.
I argued that while the UK still needed oil and gas, there was a strong case for domestic supplies on the basis of energy security, reliability, tax revenues, to support the supply chain, jobs, and yes even climate compatibility since importing Liquid Natural Gas (LNG) carries a higher carbon intensity and thus, is worse for the global climate.
A subsequent meeting with the Department of Energy Security and Net Zero (DESNZ) officials and staff from the Junior Energy Minister’s office in September to discuss the proposal led to the introduction of Transitional Energy Certificates (TECs) and a name check in the North Sea Future Plan a couple of months later.
While the Government's initial terms of reference for TECs was admittedly not as ambitious as those I stated, it did demonstrate a willingness to look at the data and evidence in support of domestic production.
Last week, the Government issued further guidance around TECs and thinking has moved on "to support the management of existing fields for their lifetime" and a wish to "connect offshore oil and gas fields to existing infrastructure via pipelines and other infrastructure".
Importantly, the geography of TECs has been amended to "include acreage that is either adjacent or in close proximity to an existing field".
The expanded remit shows that the Government is adopting a more pragmatic and nuanced approach to licensing, and hence, edging even closer to the intervention I made.
What remains key is the definition and quantification of words like "adjacent" and "close proximity". How far is that exactly?
Irrespective of the exact definitions, it is encouraging to see Government express a willingness to now wish to engage and consult with industry and academics like me on the core criteria that will form part of the final legislation.
And the prize could be considerable. Research undertaken by Westwood suggests that around 1.8 billion boe across 100 or so discoveries remain on unlicenced acreage which would be eligible for a TEC. They have also shown that further opportunities occur in licensed acreage, including around 3 billion boe of prospective resources.
It is worth emphasising that in and of itself, the tie back of existing discoveries under the TEC initiative will not move the dial and suddenly make the UK Continental Shelf an attractive investment opportunity. Only removal of the Energy Profits Levy (EPL) windfall tax would do that.
Jackdaw would be one such high profile tie-back that is currently subject to a climate compatibility checkpoint. While reports that the Secretary of State for Energy is considering the approval of the gas field have emerged, they also highlight that there is a big difference between being minded to make a decision and being in a position to actually take one.
Given that the Offshore Petroleum Regulator for Environment and Decommissioning (OPRED) only wrote to the field’s operator, Adura, at the end of last month requesting more data and evidence to demonstrate the field’s climate compatibility, it will take time to compile, submit, be assessed and a decision taken. That’s unlikely to be until the summer.
What I do take from the press speculation, however, is that the UK Government’s (or at least HM Treasury’s) position reflects more pragmatism in the face of current realities following the outbreak of hostilities in the Middle East and consequent impact for gas supplies and costs.
The coverage also demonstrates there is an increasingly clear understanding and appreciation that domestic gas supplies carry a lower carbon footprint than Liquid Natural Gas (LNG) imports that would otherwise be required for electrical baseload, domestic heating, or other energy needs.
It is important to say that because of the way the emissions scorecard is marked by country, the carbon footprint of imports does not count while domestic production does. In other words, decarbonisation can drive deindustrialisation in the UK yet be replaced by imports with a higher carbon intensity that count against the country of origin’s tally, something that forces up total emissions and consequently, is detrimental to the global climate.
For now though, nothing has changed around licensing, tiebacks or removal of the EPL, and the Jackdaw Platform cannot extract gas until Government approvals have been received. However, given the platform and jacket are on site already, it wouldn’t take long to connect up, and its gas could still enter the UK network before the year end.
Should approval for Jackdaw be forthcoming, other discoveries like Rosebank, Cambo and those that Westwood have described could follow, as will a new form of offshore permitting that permits tiebacks and infrastructure led appraisal.