The UK must drive down demand for oil and gas rather than undermining its own supplies, Offshore Energies UK’s chief executive has warned in a keynote speech.
David Whitehouse was speaking at the P&J Live venue in Aberdeen for the launch of OEUK’s Business Outlook report. The report is an in-depth analysis of the UK’s current and future energy needs – and how to meet them while also cutting greenhouse gas emissions. OEUK represents 400 offshore oil, gas and wind operators and their supply chain partners.
Whitehouse said cutting demand was essential to reaching net zero, contrasting that with a key finding of the report, that the number of UK homes reliant on gas boilers is actually increasing – even though the government has banned them from being installed in new homes from 2025. A record 1.8 million new boilers are being installed in homes annually, including in new homes.
The report said: “Household heating is the UK’s second largest use of energy and the largest component of gas consumption … About 85% of homes are heated by gas and National Grid expects the number to continue to rise slowly until 2025. Even the most ambitious scenarios from National Grid see gas being the largest domestic heating source until at least 2032.
“The UK installed around 42,000 home heat pumps in 2021 and has the lowest installation rate in Europe, with householders collectively installing gas boilers 120 times faster than low carbon systems. For context the UK government has set a target of installing 600,000/year by 2028, while National Grid says that 900,000/year (2,466 installations per day) may be needed.
Whitehouse said in his speech: “Today, 76% of the UK’s energy needs are met by oil and gas. Oil powers the 32 million diesel and petrol cars on our roads and gas boilers provide heat and hot water to 85% of homes – over 23 million of them and rising. By 2025 the number of homes reliant on them is predicted to reach 24 million.”
He warned that if the UK wanted to tackle climate change it needed to “get serious” about driving down demand. But while that demand existed it should be met as much as possible from UK resources.
He said: “Almost 40% of our domestic and industrial energy needs are met by natural gas, and the North Sea basin and wider UK Continental Shelf provides close to half of that total. It is only because of this vital resource and our offshore work force that we are not reliant on Russian imports of gas.”
“As together, we build a cleaner future there is no simple choice between oil and gas on the one hand and renewables on the other – the reality is that we need both.”
The report also showed the importance of finding and opening new oil and gas fields, pointing out that 12 new gas fields, opened in just the last five years. now supply 30% of the UK’s gas. Without more and similar investment, it warned, UK oil and gas production could fall 80% by 2035 – putting the UK at greater risk of future energy crises..
Whitehouse said OEUK was committed to net zero – but also to supporting the UK’s energy security. “Achieving net zero will take us many years, a huge amount of work and long-term planning across sectors. We will continue to need domestic oil and gas in those years … But nine out of 10 of North Sea operators are cutting back investment and at least nine major oil and gas operators have publicly confirmed plans to halt or reconsider some project plans for producing oil and gas. Some projects will proceed but not the number we need as a country.
“I am concerned that we are not on the right path for energy security, or for a successful energy transition. We have to change this.”
FULL TEXT OF SPEECH BELOW
- Good morning all, and welcome to Offshore Energies UK’s first in-person breakfast meeting of 2023 – where we are also pleased to be launching this year’s Business Outlook Report
- My name is David Whitehouse. Chief executive of Offshore Energies UK. Welcome.
- I would like to start by congratulating Humza Yousaf, announced yesterday as Scotland’s new First Minister. This is a critical time with energy policy close to the top of the political agenda.
- He is not in the room. But I hope he’ll be listening.
- For me, it is important that we achieve alignment on between the Scottish Government and Industry on energy policy and the impacts on jobs and communities. I look forward to constructive dialogue.
- I also want to add my own special thanks to our sponsor Deloitte for supporting this Breakfast Briefing series.
- We all work in the same sector and many of us work in the same city – but it’s not often enough that we can meet together – so thanks again to Deloitte for helping us make it happen.
- And of course, a big thank you to our guest panellists, and to my colleague Ross Dornan who authored the report we’ll be discussing today and who will shortly be presenting its key findings.
- I hope you will find our agenda today both insightful & thought provoking.
- I’m going to speak for 10 minutes, offering a personal overview of our sector
- Then, we’re going to show a short animation – offering a few key points from the Business Outlook report.
- And then we’ll have the main event with Ross giving the details of his report.
- After that we’ll take a half hour break for talking, networking and saying hello to old friends.
- We’ll finish with a panel discussion, led by Jenny Stanning, our external relations director, with speakers including Ross, Arne Gurtner of Equinor, Claire Phillips of Baker Hughes, and Hari Vamadevan of DNV.
- So, I would like to start this morning by introducing myself and sharing my own reflections where we stand as an industry and the path ahead.
- I have been proud to have worked in our sector for 30 years.
- In my time, I have had the privilege of working in Africa, in the Gulf of Mexico, in the far east, and for the last 20 years based here in Aberdeen. Always in operational roles.
- I was attracted to the sector 30 years ago, because it was an environment where we innovated, where we were at the forefront of technology. It was a sector where you worked with great people, collaboration was rewarded, and we delivered great projects and managed incredible assets.
- Our sector has now rightly embraced the challenges and opportunities of the Energy transition.
- At its core, this sector is still fundamentally about decent people, working together, doing the right thing. Thats the reason I took on this job.
- I am still getting settling in. I’m up for the challenges ahead, I enjoy that fact that as a sector we are all pulling in the same direction, I’m part of a great team at OEUK.
- But for me, politics is going to take getting used to. PAUSE. Although politics is also going to have to get used to me too. PAUSE.
- Today we meet at a difficult time for industry – against the backdrop of a cost-of-living crisis for people up & down the country, the potential for strike action on our North Sea assets, taxes that are undermining investment, energy security pressures, and an ongoing major conflict in Ukraine that has no end in sight.
- And in 2024, we can anticipate there will be a UK general election where energy and the cost of living will be top of the agenda. These are important times.
- Taxes imposed on North Sea oil and gas operators, under which their overall tax rate has risen from 40% to 75% in just 10 months. Offshore wind operators face a similar tax, rated at 45%. Both taxes will remain in place even as oil and gas prices drop till 2028 as it stands.
- Those tax rises make it much more difficult to finance new projects. There are other headwinds.
- The Labour party has floated proposals to backdate and raise the tax, and remove most tax allowances, should it win power. Those proposals if enacted will undermine our sector further.
- We should not forget that the headlines we see, the statements we read, also undermine the 200,000 decent people whose jobs depend on the sector.
- Nine out of 10 of North Sea operators are cutting back investment and nine major oil and gas operators have publicly confirmed plans to halt or reconsider some project plans for producing oil and gas.
- Some projects will proceed but not the number we need as a country.
- I am concerned that we are not on the right path for energy security, for a successful energy transition. We have to change this.
- I’m confident that, if we act together, we will.
- The North Sea has supported the nation for 50 years to keep the lights on, vehicles moving and the whole economy working, while also supporting hundreds of thousands of jobs
- Today, 76% of the UK’s energy needs are met by oil and gas. Oil powers the 32 million diesel and petrol cars on our roads and gas boilers provide heat and hot water to 85% of homes – over 23 million of them and rising.
- Our reliance on gas is actually rising – partly because gas boilers are still being fitted into new homes. In fact, housebuilders and householders are collectively installing gas boilers 120 times faster than low carbon systems.
- By 2025 the number of homes reliant on them is predicted to reach 24 million.
- It means almost 40% of our domestic and industrial energy needs are met by natural gas, and the North Sea basin and wider UK Continental Shelf provides close to half of that total. It is only because of this vital resource and our offshore work force that we are not reliant on Russian imports of gas.
- As together, we build a cleaner future there is no simple choice between oil and gas on the one hand and renewables on the other – the reality is that we need both.
- Our oil & gas heritage is the platform for a successful energy transition.
- The Climate Change Committee has said the UK will need oil and gas to 2050 and beyond. The discussion is where does that come from? Do we import or produce? Last year alone, the UK imported a shocking £117bn worth of oil and gas, exporting our jobs & skills. That cannot be the answer
- We fully support the transition, but we don’t underestimate the size of the challenge – which Ross will set out in more detail.
- To reach net-zero, we will need to install at least one offshore wind turbine every single day for at least the next decade.
- We need to invest billions in our strategic infrastructure, our electricity grid, our ports.
- To reach net zero we’ll need to insulate more than two million homes a year by 2028 according to the climate change committee – that’s about 6,500 homes a day.
- Our 32 million petrol and diesel vehicles need to be replaced too. If we were to aim for that by 2050, we’d need to buy 3,500 low carbon vehicles each day for the next 27 years.
- There are huge opportunities for the UK in carbon capture, in the hydrogen economy, in floating wind. We need our sectors skills and resources to deliver those opportunities at scale, but this will take huge investment and time.
- So be clear. Achieving net zero will take us many years, a huge amount of work and long-term planning across sectors.We will continue to need domestic oil and gas.
- It is estimated that over a staggering 1.4 trillion pounds of investment will be required to decarbonise the UK economy. The bulk of that investment will come from private companies, private companies that have choices on where to invest.
- Across the world, in Europe, Asia, and critically USA, policy is in place to attract the investment necessary. We are in a global race for energy investment and the UK is falling behind. At the moment, our report suggests, most UK operators are actually cutting investment.
- Our governments and politicians have climate goals that we fully support. That the public support.
- We need energy policy that supports those goals.
- We need the UK to be the great place to invest. We need our sector to be the best place to work. We need to continue to attract great people.
- So, we do have requests of governments and politicians:
- Recognise the importance of oil and gas as fundamental to a successful energy transition. Don’t undermine a key sector at this critical time.
- Ensure that there is a stable investment environment for oil and gas and wider new energies and renewables.
- Provide timely support for the new opportunities in carbon storage and hydrogen.
- Work with industry to make it efficient to get things done. We need regulation but ensure it is joined up, resourced, efficient, and aligned to the net zero goals.
- Work with industry, work with across government to deliver a collaborative long-term plan to deliver. Invest in the Uk’s strategic infrastructure.
- We need energy policies that break down barriers– there is no division between oil & gas jobs and green jobs, it’s the same people. There is no division between the oil & gas supply chain and renewable supply chain, it’s the same companies. We achieve our net zero goals by working together.
- But it is not all down to Governments, we need to address issues in our own sector:
- Let’s deliver excellence in our commercial behaviours. Pay our bills on time. Follow through on tenders.
- Let’s give the supply chain visibility of upcoming work plans. Prioritise local suppliers and manufacturers.
- Lets continue to collaborate & work together effectively across the sector.
- Our sector is the platform with the skills and knowledge to deliver a secure, affordable, zero carbon economy in Scotland and the UK with real benefits to our communities. That anchors the supply chain and jobs in the UK.
- In these critical times, we want you, our members – all of you in this room – to be confident that we are out there making that case,
- But we all need to act together. We need you.
- If you are proud of the industry, proud that we provide decent jobs, energy security. Please speak up.
- If you are proud that we are decarbonising our production, we are in action on the energy transition, on anchoring supply chain opportunities in the UK. Please speak up.
- If you are proud of the jobs and communities we support. Please speak up.
- Critical times lie ahead.
Energy Fast Facts about 2022
- 76% Proportion of UK’s total energy derived from oil and gas
- 215,000 Number of jobs supported by the offshore industry
- £28 billion (bn) Value of the UK offshore industry and supply chain to the UK economy
- £11bn Oil and gas production taxes paid to the UK exchequer in 2022/23
- £117bn Cost of energy imports in 2022 (compared to £54bn in 2021)
- 77bn cubic metres (bcm) UK’s gas consumption in 2022
- 1,150 cubic metres Average UK gas consumption per person
- 34 bcm UK gas production
- 44% Proportion of UK gas that came from the North Sea
- 116 pence per therm Average gas price in 2021
- 203 pence per therm Average gas price in 2022 (a 76% increase)
- 61 million (m) tonnes UK oil consumption in 2022
- 0.9 tonnes Average UK oil consumption per person (mostly road fuels)
- 41m tonnes UK oil production
- 67%: UK oil production equated to more than half of consumption.
- £52 per barrel Average price of oil in 2021
- £82 per barrel Average price of oil in 2022 (a 60% increase)