Oil & Gas

26 May 2023

Energy Minister: ‘We Will Never License Oil and Gas Development in the UK That Isn’t Compatible With Net Zero'

26 May 2023  by businessgreen   

Graham Stuart insists new oil and gas licenses are compatible with UK climate goals, as he argues UK can continue to attract green investment without engaging in 'subsidy race'

Energy Security and Net Zero Minister Graham Stuart has today defended the government's net zero strategy, insisting the UK is leading the world with its decarbonisation efforts and can deliver on its upcoming carbon budgets.

Speaking at the Innovation Zero conference in London this morning, Stuart said he had "absolute confidence in our system", despite the growing international competition for clean tech investment triggered by the adoption of the US Inflation Reduction Act (IRA).

He argued the UK's Climate Change Act and "across the aisle" consensus on climate action meant the country was "the most stable and secure place to invest in the [clean energy] transition".

He added that he was glad the US had "woken up" and the EU was adopting more ambitious decarbonisation policies, but challenged the two economic superpowers to now emulate the UK and adopt more ambitious emissions targets through the national climate action plans they submit to the UN under the Paris Agreement.

Speaking to reporters after his keynote address, Stuart expanded on his argument that the UK is a world leader on decarbonisation that has arguably not done enough to promote its achievements.

"We have mandates and a mature regulatory system which for political reasons the US couldn't implement," he said. "I think ours is, frankly, a superior approach. It is well proven, and I am confident in our ability to attract investment into the UK to deliver the renewables and other transformations we are seeking. We are not going to enter into a subsidy race - the good news is I don't think we need to."

Stuart also defended the government's plans to issue new oil and gas licenses, arguing the strategy could be made compatible with the UK's net zero goals.

"We are committed to new oil and gas licenses in the North Sea," he said. "We are a net importer of gas and oil, we reject the idea that maximising recovery from a fast declining basin - declining more quickly than is required globally - and thus the minimising amount of imports [is the wrong course of action]."

Stuart reiterated his argument that imports of LNG could have emissions that were 2.5 times higher than domestically produced gas. "We firmly believe in producing our own oil and gas as net importers, which we will continue to be even as demand falls," he said. "We are spending tens of billions on imported fossil fuels, often produced with lower standards of production."

He also argued the renewables and oil and gas industry supply chains were increasingly intertwined, and as such it made sense to continue to develop oil and gas projects to retain an engineering supply chain that will be needed to accelerate renewables development.

Challenged on whether new oil and gas projects could be made compatible with legally binding net zero targets, Stuart insisted projects would not proceed if they failed to pass a 'climate compatibility' test.

"The UK was the first major economy to legislate for net zero," he said. "We have a five year carbon budget. We are practically alone in being on a trajectory to net zero… We will still, in 2050, under net zero, be using around 20 to 25 per cent of the gas we use today. Producing it at home, with very high standards, rather than importing it in is the right thing to do. It is not a hard argument to follow.

"Any license will have to pass the climate checkpoint, which is used by the commissioning authorities. We will never license oil and gas development in the UK that wasn't compatible with net zero and 1.5C."

The comments angered campaigners who have long argued that the government's 'climate compatibility checkpoint' is not sufficiently robust, as it does not adequately account for the emissions that result from the oil and gas that is extracted from new projects.

Greenpeace UK climate campaigner Philip Evans decried the Minister's suggestion that new oil and gas production in the North Sea could compatible with net zero as "absurd".

"All new oil and gas drilling is incompatible with 1.5C," he argued. "Don't just take my word for it, this is also the view of the International Energy Agency, the UN secretary general, as well as countless academics and scientists.

"If the government had a shred of interest in limiting the impacts of the climate crisis it would reverse its decision to allow more fossil fuel production, and stop propping up an industry that's destroying the planet. And by properly taxing the astronomical profits of oil and gas giants the government could begin upgrading the grid and start to unleash the full potential of renewables so we can all have cheap, clean power."

Stuart's assessment of the UK's competitiveness also runs counter to the views of a number of leading business figures, who have warned the government needs to do more to attract clean tech investors and developers or risk seeing crucial emerging industries shift investment to the US and Europe.

The government is reportedly set to pull off a major green investment win next week, with Indian conglomerate Tata said to be poised to confirm plans to build a new electric vehicle battery factory in Somerset. The Treasury is expected to sign off on a major financial support package for the company to help secure the inward investment.

Elsewhere, Stuart offered assurances that the government was working hard to tackle grid connection delays for new clean energy projects.

"Connection times are too long and need to be sped up," he said, describing the issue as the biggest challenge facing the Department for Energy Security and Net Zero. He argued various initiatives were underway to tackle the problem, noting that there was now a dedicated Minister for Nuclear and Networks and highlighting how regulator Ofgem had come forward with recent proposals to help tackle the lengthy queue for grid connections.

He also reiterated the government's view that heat pumps are likely to become the dominant green heat solution. He insisted no decision had been made on whether to allow the blending of hydrogen in the gas network, but he stressed that "we are extremely committed to heat pumps and we think heat pumps are going to be the primary form of heat provision going forward".

His comments came as the government today confirmed the UK has now gone a full year without importing any gas from Russia.

The latest figures also showed renewables generated a record 46.2 per cent of UK electricity from major power producers over the past three months, up from just 3.5 per cent for the same period in 2010.

"We have led the world in standing up to Putin's attempts to use energy as a weapon of war and, by slamming the door shut on Russian gas, we are helping to cripple the Kremlin war machine and safeguard the UK," said Energy Security and Net Zero Secretary Grant Shapps. "I'm relentlessly focused on reducing our reliance on foreign fossil fuels and powering-up Britain from Britain to deliver cheaper, cleaner and more secure energy."

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