Source · Select Committees · Environmental Audit Committee
Recommendation 2
2
Acknowledged
Paragraph: 34
Require the North Sea Transition Authority to calculate decommissioning cost impacts for new licences.
Recommendation
We recommend that to mitigate against the risk of stranded assets from North Sea extraction, the North Sea Transition Authority should calculate what the impact to the UK taxpayer and company profitability would be of requiring the cost of decommissioning to be absorbed for new oil and gas licences through the introduction of duties on operators.
Government Response Summary
The government highlights the importance of domestic oil and gas and existing decommissioning regulations, stating that OPRED reviews the risk of stranded assets. OPRED offers to engage further with the Committee to understand their policy suggestion regarding calculating the impact of new duties on operators for decommissioning costs, without committing to the calculation itself.
Paragraph Reference:
34
Government Response
Acknowledged
HM Government
Acknowledged
The domestic oil and gas industry is vital to the UK’s energy security. While the Government is scaling up domestic clean energy sources, the UK still relies on oil and gas for most of our energy needs and there will be continued need over the coming decades. New licensing will help bolster our energy security, decarbonise production, and bring jobs, investment, and revenue to the UK. Even with new licences, UK oil and gas production is declining at 7% a year, ensuring a managed decline at a pace that supports the UK’s energy security and the offshore workforce’s transition away from fossil fuels. The Government has not fixed an end date for future oil and gas licensing, as a 2021 review concluded continued licensing is not inherently incompatible with the UK’s climate objectives. A climate compatibility checkpoint has been introduced to test whether new licences would be compatible with our climate commitments, with its design published on 22 September 2022. The Offshore Petroleum Regulator for Environment and Decommissioning (OPRED) is responsible for regulating decommissioning activity including ensuring that the requirements in Part IV of the Petroleum Act 1998 are complied with. OPRED’s regulatory regime already ensures that operators are responsible for decommissioning installations and pipelines in the North Sea. The regime is designed to protect the taxpayer from decommissioning liabilities, and OPRED regularly reviews that purpose in the context of changes to the UK Continental Shelf, including the increased risk of stranded assets. In response to the recommendation in paragraph 34, OPRED would welcome the opportunity to engage further with the Environmental Audit Committee’s policy suggestion to understand more about the thinking behind their proposal.