Policies intended to reduce greenhouse gas emissions have traditionally relied on reducing demand for fossil fuels through taxation, emissions trading, or ending coal-fired generation, for example.
Far less attention has been given to restricting supply – when and how the world should stop extracting coal, oil and gas, and if projects that are planned, permitted or under construction should be canned.
Tom Burke, chair of think tank E3G, agreed. Increasing the production of fossil fuels would be “bucking the clear direction of policy”, leaving investors with a “real risk” of having assets that cannot be exploited, he told ENDS.
“If the stuff is for domestic consumption then it clearly is not compatible” with net zero, the former government environment adviser argued.
Although it is “probably legal” to rescind existing consents, “you would almost certainly have to” buy out their value, Burke said. Conversely, the government may risk legal challenge if it does not take such action, Burke claimed.
Restricting production is clearly politically sensitive. The National Infrastructure Commission and the Coal Authority, which licences new mines, declined to speak to ENDS about it, as did the Committee on Climate Change (CCC). But it is not wholly unprecedented given the government ditched support for underground coal gasification in 2016.
Last week, exploration and development company Aurora Energy Resources announced plans to drill and frack two wells in Great Altcar, 20km north of Liverpool. Local Friends of the Earth campaigner Estelle Worthington derided the move as “irresponsible” given the tightened carbon goal.
Further to the north, Cuadrilla believes that its licensed area in Lancashire holds at least 200 trillion cubic feet of gas. If all of it was burned – though a practical impossibility – it would produce around 10 billion tonnes of CO2 30 times the UK’s current greenhouse gas emissions. The figure is close to the amount that could be released from now to 2050.
The firm also has extensive rights in Yorkshire and southern England.
Its chief executive Francis Egan emphasised that the CCC has recognised that “we will continue to be using significant quantities of natural gas in the UK out to 2050 and beyond in conjunction with carbon capture and storage (CCS) technology and in producing hydrogen as an alternative energy for the future.”
Third Energy (just sold to US-based Alpha Energy), Rathlin Energy, IGas Energy and Angus Energy also have plans to put UK shale gas on the market.
West Cumbria Mining intends to build the UK’s first new deep coal mine for three decades. It believes there is 750Mt of metallurgical-grade coking coal in Whitehaven, Cumbria, suitable for use in steel production. The mine would extract 2-3mt of it per year, cutting the UK’s trade deficit by 1.4-2%, it estimates.
Another deep mine is also in the pipeline. Australia-based firm New Age Exploration’s Lochinvar project intends to win 33.7Mt of the coking coal over 26 years – rubbing up close to the net zero deadline. Around 111Mt of coal may be under its licensed area on the southern Scottish border.
Banks Mining has also has plans for two opencast projects: the well-known Druridge Bay scheme, which could dig out 3Mt of coal over seven years. A planning application for the smaller Dewley Hill project near Newcastle-upon-Tyne was submitted in February.
Banks emphasises the carbon cost of importing fuel to the UK. Transporting it from Russia or Australia would release 4.5 times more CO2 than moving it from Dewley Hill, it says.
Potentially the most important new onshore oil development is the Horse Hill site, also known as the ‘Gatwick Gusher’ due to the airport nearby.
Commercially exploitable flows have already been demonstrated from three reservoirs underneath the site. In all, they could hold as much as 100bn barrels of oil, implying potential emissions of 31.7 billion tonnes of CO2. However, other estimates have been far more conservative.
Surrey County Council is currently considering a planning application to bring the exploration site into full production.
Offshore oil and gas
Although it produces far less than it once did, the UK’s offshore oil and gas sector still meets about 60% of domestic demand.
Up to 385 million barrels of oil are thought to have been discovered offshore last year – 122mtCO2 if burned. More new projects were approved last year than the previous three combined, according to a report issued earlier this year by Oil and Gas UK.
The government may be expected to be reluctant to accelerate the industry’s inevitable decline, especially considering the tax breaks it provides to encourage its growth.
Taxation arising from offshore oil and gas activities alone is still an important source of revenue, expected to bring in £1.1bn this financial year, according to the Office for Budget Responsibility.
Around 1.5 billion barrels of oil remain in “potentially commercial undeveloped discoveries” on the UK’s continental shelf, says the Oil and Gas Authority. The thirtieth round of offshore licensing, awarded in May last year, is expected to progress about 20% of these untapped reserves.
Mike Tholen, upstream policy director for industry group Oil and Gas UK said: “Current fields in production provide only a small proportion of the oil and gas that the CCC recognises that the UK will require on the path to 2050. The UK’s offshore oil and gas industry is committed to reducing the emissions arising from its exploration and production activities and also has a vital role to play in the implementation of carbon capture and hydrogen technologies.
“Continued exploration and production activity will also help sustain energy sovereignty which will remain important in years to come,” he added.