Monday 26 January 2004

Offshore Oil and Gas Industry sees Potential for “Irreparable Damage” by Draft Emissions Trading Scheme Allocations

Calls for urgent meeting with government

The UK Offshore Operators Association (UKOOA), the trade body representing UK offshore oil and gas producers, has called for an urgent meeting with the Department for Environment, Food and Rural Affairs (Defra) to raise concerns about the industrys allocation of carbon dioxide (CO2) allowances in the draft National Allocation Plan for the EU Emissions Trading Scheme, issued on Monday 19 January.

UKOOA is challenging Defra on the industrys allocation which appears to be fundamentally flawed. The Association will be asking Defra to correct the provisional allocation to ensure that the offshore oil and gas industry is treated equitably.

In a letter written to the Department, UKOOA claims that:

* Numerous onshore installations have been included in the offshore calculation while a number of qualifying offshore installations appear to have been overlooked altogether and have received no allocation at all;

* Many installations appear to face cuts in emissions of 30-45 percent, which neither reconcile with the method of calculation which is said to have been used nor is consistent with 16.3 per cent overall reduction in UK CO2 that the Government states it is looking for through the ETS.

UKOOA fully recognises the environmental commitments that the country has agreed to and the part which industry should play. It points out that natural gas, more that anything else, has put the UK on course to meet its emissions reduction targets. But the Association is concerned that the draft allocation of allowances, as it currently stands, runs counter to Government policy on the future of the UK continental shelf (UKCS) and will seriously damage the industry in the short-term and reduce the long-term sustainability of the UK oil and gas business.

The Government has been working with industry in recent years through the joint government-industry forum PILOT on measures to prolong activity in the UKCS. Furthermore, the Energy White Paper published last year recognised that maximising recovery of UK oil and gas is vital to the countrys future security of supply.

In its submissions to Defra in the run-up to the draft National Allocation Plan, UKOOA emphasised the maturing nature of the UKCS and the inevitably increasing emissions in the short to medium term as production declines and reservoir pressures fall, but pointed to emissions tumbling in the next decade as fields cease production and facilities are decommissioned.

Steve Harris, UKOOAs acting director general, said: We are concerned that the allocation of allowances to our industry, if correct, places an unreasonably heavy burden on UK oil and gas producers. It would appear to fail Defras own stated method of calculation or to acknowledge the natural lifecycle of oil and gas production in the UKCS and that, if implemented, would hasten the closure of mature fields. We think the calculations are wrong and we are anxious to get to the bottom of it before irreparable damage is done to the industry.

Note to Editors

1. The UK Offshore Operators Association (UKOOA) is the representative organisation for companies licensed by the British Government to explore for and produce hydrocarbons in UK waters. It has 29 members.

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