NSTA Chief Executive Stuart Payne delivered the keynote speech and presentation during the Energy Industry in Transition Conference, hosted by the University of Aberdeen’s Business School on 21st May 2024.
Stuart discussed Aberdeen’s status as an energy city and the NSTA’s role in the transition to net zero.
Read the speech below and view the presentation here.
Title slide
Good afternoon, I am Stuart Payne, chief executive of the North Sea Transition Authority and have been since January 2023.
This year marks the 25th anniversary of me moving to live in Aberdeen. As my accent will give away, I wasn’t born here but I have been proud to call it my home for a quarter of a century.
For those good at maths, you will know that means I moved here in year 1999.
For those good at history, you will know that 1999 was also the year of peak production for North Sea oil and gas.
I should at this point make clear that I view the following 25-year decline in production and my arrival in the city as coincidence, rather than causation.
But seeing this change over the past few decades does mean that I have seen up close how the energy sector shapes the city I am proud to call home.
I also hope that the organisation I'm fortunate to lead will play a meaningful role in helping to shape the next 25 years in the city’s energy story.
Slide 2 - Aberdeen Energy City
That Aberdeen has been, and is, an energy city is without doubt.
From the moment you arrive in the city you can feel that this is a different place. A place with a story and a place with a clear identity. Aberdeen has a strong sense of place.
On a clear day as you fly into the airport you will be able to see both oil and gas rigs and offshore wind turbines.
As you land you hear the buzz of helicopters returning from offshore. You leave the airport and jump on a hydrogen powered bus, travel past the fuel-cell powered PJ live, most likely hosting an oil and gas trade show.
Maybe you’ll jump in a cab – the driver won’t ask what industry you work in because he already knows.
If you’ve arrived by train it’s a short stroll down to the harbour where the supply ships will be ready for the next voyage to restock the platforms miles offshore or ferry parts to a new wind development. And of course then there’s the fantastic new South Harbour which today could be just as easily hosting tourists or turbines.
But Aberdeen’s status as an energy city today is no guarantee for the future. Oil and gas are still flowing, but it is no longer widely regarded as the “black gold” it once was, although that doesn’t mean that there aren’t opportunities waiting to be seized.
One of the obvious advantages that enabled Aberdeen to boom was a concentration of fossil fuels located off our coastline. A second key advantage it had was an ability to build, attract and retain a world class supply chain and workforce.
These reserves were fixed in place, in a specific place and Aberdeen, the surrounding towns and ports and other places down the East coast took advantage.
In the future, energy could become much more dispersed than in the past.
In this context how does Aberdeen build on what it already has, to capture the value of the energy transition, and retain its place as an energy city – for the benefit of the whole of the UK?
My view, and the view of the NSTA, is the UK is ideally placed to maximise the potential of the energy transition, and it will be in no small part by exploiting that second advantage – existing talent and capability in places like Aberdeen.
We can combine the UK’s natural geological endowment for carbon storage and its almost unlimited offshore wind resource, with the existing infrastructure, expertise and commercial know-how in places like Aberdeen to accelerate the UK’s transition to net zero.
But we need the right approach, including the right regulatory approach.
Today, I want to set out how the NSTA is working to deliver cleaner oil and gas production.
I want to set out our vision for low carbon energy hubs – the new energy places.
And I want to discuss how we avoid tripping up over the size of our offshore potential in such a small and busy sea.
Get it right and Aberdeen, and other places along the UK coast, can be low carbon energy pioneers.
Slide 3 - North Sea current context
Let’s be clear, we still need oil and gas in the UK.
Currently fossil fuels provide around three quarters of the UK’s energy needs and government data suggests that even in 2050 it will still meet around twenty percent of our energy needs.
Feedstock for the chemical industry and advanced manufacturing, areas the UK has strong competitive advantage in, will be a major element of demand.
The NSTA’s projections for future production, even with new field developments, show that domestic production will fall much faster than domestic demand.
Industry is also looked to in order to justify why even the declining level of production should be allowed to continue.
In the future, domestic production must be decarbonised production.
Slide 4 - Decarbonising domestic production
In 2022 on the UKCS the average carbon intensity of producing one barrel of oil and gas was 19kg of CO2 per barrel.
Across the marine border, in Norwegian waters, it is 6. That is more than two thirds cleaner in the same basin.
This is a gap we at the NSTA are intent on closing.
In a world where low carbon products will hold more value, or cross border carbon taxes become more common place, failing to decarbonise becomes a threat to competitiveness.
At the same time, pressure to do more to tackle to harmful waste of gas from flaring and venting will increase.
The UK’s relative performance on production emissions will either be a reason to defend it, or a reason to oppose it.
Energy security alone will not be sufficient reason to continue with business as usual.
Domestic production must be decarbonised production.
As the regulator, the NSTA is taking action. We have been pushing industry since 2021 when we updated our core strategy, introduced new guidance and expectations on how we steward projects.
This means a focus on maximising economic recovery and on supporting the UK achieving net zero.
Since the start of last year the NSTA have approved 9 new projects, worth over 4 billion pounds of capital expenditure and nearly 400 million barrels of new production.
All of these projects were scrutinised through the NSTA’s net zero regulatory lens.
And earlier this year we published a new emissions reduction plan, known as the OGA Plan. It puts requirements on industry to decarbonise their existing and future production.
I know this has not been welcomed with open arms, but if everyone agreed with us as a regulator, we wouldn’t be doing our job very well and I’d like to thank those that took part in the consultation process for engaging with us.
It’s worth revisiting why we felt the plan was needed.
For all the good progress industry has made in recent years – a 23% reduction in overall emissions since 2018, and a near 50% reduction in flaring - without a step change the 2030 target and beyond in the North Sea Transition Deal would likely be missed.
This is why we have put decarbonisation – including electrification, at the heart of the plan because that is the route, we see delivering the biggest emissions reduction without simply turning off the taps.
We do understand the concerns.
Electrification, particularly on existing facilities, will be complex.
But when did this industry ever not do something because it was hard?
Electrification will be expensive.
But we need to be clear, this plan is not essentially about constraining industry, it is about enabling it to continue.
If industry want to be able to access the value that still remains in the basin - then it must deliver deep and sustained decarbonisation.
We can only use the argument that domestically produced gas has a lower carbon footprint than imported LNG as long as it continues to be true.
So, decarbonisation is not just a cost, but a downpayment on future value.
Domestic production must be decarbonised production.
Slide 5
The NSTA vision of future North Sea oil and gas production sees decarbonised hubs with zero routine flaring and venting, linked to a network of tie backs and near-field developments.
Infrastructure led, collaborative, technologically advanced.
Done right there could be another 5bn barrels of production from the North Sea, with a potential emissions saving of up to 25million tonnes of CO2 against business as usual.
Done right, this city can continue speaking with pride about a world leading oil and gas industry decades from now.
So much of what is at stake comes down to people. It has been people who’ve made the industry what it is today, facing the challenges that are put in front of it.
It will be those same people – and I hope future generations, that take the energy challenge forward.
We know that 90% of the current oil and gas workforce has the skills to transfer into low carbon technologies.
A few miles towards Alford, and on my way home, is Westhill, a suburb that is home to the largest cluster of subsea specialist companies in Europe. These companies will be essential to delivering floating offshore wind or new pipelines for carbon storage.
If we lose that expertise too soon, we risk that orderly transition to net zero.
Because oil and gas alone, even decarbonised, will not secure the status of Aberdeen as a future energy city. Production is going to decline, demand will fall.
If Aberdeen wants to remain at the forefront, then increasingly the technologies of the low carbon transition will be essential.
Slide 6 - Integrated energy hubs
The seas around the UK offer huge natural potential here. We have some of the best offshore wind resource in the world.
An estimated 78GT of carbon storage potential – enough to meet centuries worth of domestic demand, or of course a vast opportunity to tackle emissions from around the world and support the UK economy, our industries and skilled jobs.
Combine this with our existing infrastructure and there is huge scope for the production of clean hydrogen and new low carbon fuels.
Fitting all of the required energy and low-carbon projects into an increasingly crowded North Sea will be a big challenge.
At the NSTA we believe the answer lies in integrated energy hubs or low carbon hubs.
These new places will be a combination of energy technologies, leveraging critical infrastructure and co-locating with industrial customers.
Importantly they will be real places, with real infrastructure supporting real communities and real jobs.
Currently there have been 10 multi-energy hubs proposed along the UK shores.
These 10 hubs alone would be sufficient to kick off the net zero transition in anger, enabling the ambitious 2030 UK government targets: up to 30 mtonnes per annum of stored CO2, 10GW of hydrogen capacity developed, 6 green and 4 blue and 50GW of offshore wind power.
We have hubs spread across the whole of the United Kingdom.
There are hubs being developed from old gas terminals such as at Bacton and Flotta, and those making use of existing infrastructure like Hynet, and Acorn at Peterhead.
Some will see gas resources from the North Sea used for power generation, manufacturing or hydrogen production with the resulting CO2 captured, piped back offshore and stored under the seabed.
The NSTA is playing its part in bringing these proposals to reality.
Last year we ran the first ever carbon storage round and awarded 21 licences, in addition to the six licences that we were already stewarding.
A few weeks ago, we announced work to consider further possible licences off of the south coast of England.
We have lent our expertise to the City of London to help them develop insurance products for this new sector, a vital key to unlocking commitment from investors.
Our team of geologists, geoscientists, and engineers, many from Aberdeen, have developed a robust regulatory regime setting out the requirements on operators to monitor their stores.
We are working to be able to take a decision on the first two permits for carbon storage later this year, which would see CO2 stored under the seabed of UK waters well before the end of this decade.
These projects – at HyNet in Liverpool Bay and Endurance off Teesside, will see new wells being drilled, infrastructure developed and reused.
The drillers, geoscientists, reservoir engineers, process engineers, welders and more will be putting back in the ground what their predecessors took out.
These projects are the first steps in securing a future for the kind of careers that might otherwise have disappeared.
This is no longer just talk but real action delivering the transition.
Slide 7 - Offshore energy Rubik's Cube
With such potential abundance of wind, carbon storage, hydrogen storage, production of oil and gas, one of the biggest challenges facing the offshore sector is trying to fit all these elements together in one small, busy sea-space.
This is what I’ve descried before as solving the offshore energy Rubik’s cube.
Imagine each different colour as a different part of this diverse mix.
You have ongoing oil and gas production and the associated and interconnected web of wells, platforms and pipelines.
There has a been fourfold increase in offshore wind capacity in the last 10 years and there are now over 2,500 wind turbines scattered around the UK’s coast with thousands more due to come onstream over the coming years.
The NSTA estimate the UK could need up to 100 carbon stores to meet the 2050 net zero requirements.
But there are also all the other users of the sea. Whether it’s vital interests like fishing, defence, and aquaculture or a network of Marine Protected Areas.
The solution to the cube will be a combination of regulatory and policy co-ordination, technological innovation and new commercial agreements.
It will require cross sector collaboration and a deeper understanding of each other’s industries so that where there are overlaps technologies can find ways to co-exist, as well as unlocking opportunities such as sharing data, vessels and services.
The Crown Estate Scotland’s INTOG leasing round, which the NSTA has been advising on, is a brilliant example of innovation to try and fast track floating offshore wind AND decarbonise oil and gas production.
If successful it points to a model for offshore wind developments solving a problem of electricity supply for oil and gas and finding an additional market for their power.
But it needs grown up conversations between different parts of government and different energy sectors to make it work. There are very real questions and issues to be tackled.
We know in some instances co-location can be really complex to achieve.
Resolving this will be one of the challenges this current – and future – generation of leaders, policy makers, scientists and engineers have to step up and deal with.
In years gone by, great minds have worked together to tackle depths of imaging in the subsurface that we previously considered “invisible”.
In years gone by, great minds have worked together to deploy operations in water depths, and into reservoir pressures & temperatures that we were considered “impossible”.
Getting the full value out of the huge potential that the North Sea offers is the challenge of our time. We need great minds to work together again.
Slide 8 - Conclusion
One great strength of the offshore environment is that people don’t live there permanently. In many ways it is place-less.
Yet the offshore does not exist in a vacuum. The people who build the infrastructure come from a specific place. The product they create must land in a specific place.
It is those places, places like Aberdeen, and other others like it all across the coast of the UK, where expertise clusters and new innovations are born.
Aberdeen has a strong track record for entrepreneurship, with business start-up numbers, patent applications, inward investment and R&D spend consistently above national averages.
And it is in these places that people develop a pride for what they are part of.
That matters because the placelessness of the offshore is also a great weakness. Out of sight. Out of mind.
I am an advocate for this sector and its people because I have lived here for 25 years and have seen what it can do and its impact on the city.
I want to see it continue to thrive and to me that means an ever-cleaner oil and gas sector, providing the skills and the expertise to accelerate the low carbon transition, and unlocking the UK’s huge economic potential.
ENDS
Please note - There may have been some slight variations in the delivery of this speech.