At the close of 2023, our CEO Francesco Mazzagatti took the spotlight as a speaker at the World Energy Capital Assembly conference, where he shed light on the future landscape of the energy sector. Following this, Mr. Mazzagatti engaged in an interview with the Energy Council, covering the key aspects of Britain’s position towards net-zero. This article provides an overview of the UK’s energy sector at the end of 2023, along with insight into Mr. Mazzagatti’s contributions and perspectives.
North Sea licences
The UK government’s recent decision to award 27 North Sea licences is a strategic move. The move is aimed at reducing the country’s dependency on energy sources from “hostile foreign regimes.” This suggests a geopolitical motivation behind the licensing process. The UK aims to improve its energy security by relying more on domestic resources rather than sources that may be politically unstable or controlled by unfriendly nations. Also, the decision may be influenced by a desire to strengthen the country’s energy independence in the face of disruptions in the global energy supply chain.
Now is the time for the government to adopt a more forward-looking approach
Francesco Mazzagatti expressed appreciation for the recent awarding of North Sea licences but urged the government to adopt a more forward-looking approach. This implies a call for strategic planning, one that anticipates future challenges and opportunities rather than simply reacting to current needs. The government should consider long-term implications, especially in the context of energy transition and geopolitical uncertainties.
In addition, Francesco Mazzagatti emphasised the need for the UK to have a reliable domestic energy source to stay competitive. This is a crucial component of energy security. While the transition to net-zero and a shift to greener energy sources is happening, the UK must ensure a consistent and dependable energy supply.
Net-zero target by 2050
The Climate Change Committee’s data reveals the continued reliance on oil and gas even post-2050. This highlights the recognition that fossil fuels will remain a part of the energy mix for some time. Even in a net-zero scenario, oil and gas might still play a role, especially in specific industries or as a backup source.
This underlines the complexity of the energy transition and the necessity to balance immediate energy needs with long-term sustainability goals. A rapid shift away from traditional energy sources might not be feasible and the government should work collaboratively with energy companies to develop a supportive framework for a gradual transition.
Calls for licences to be granted until at least 2035
In the North Sea, where Viaro Energy operates through its main subsidiary RockRose Energy, the average life of an oil or gas field is approximately ten years. This means that after a field is discovered and developed, it typically reaches a point where its production becomes economically challenging, and the field’s overall productivity declines. Many of the fields in the
North Sea are now approaching the end of this typical ten-year life span.
To address this, Francesco Mazzagatti suggests that licences for oil and gas extraction in the North Sea should be extended until at least 2035. This proposed timeframe takes into account not only the remaining life of the existing fields but also the time required for further development and extraction activities. By extending the licences, the government would provide the necessary stability and predictability for companies to plan their operations efficiently.
For companies involved in the extraction of oil and gas, having a clear understanding of the licensing landscape over an extended period is crucial. It allows us to make responsible plans for the extraction from current fields, ensuring maximum efficiency while also facilitating strategic investments in renewable energy sources.
This longer-term perspective is seen as vital for maintaining continued investment in the North Sea region and contributing to the UK’s energy security and transition goals.
Thoughts against piecemeal licence extensions or the Labour Party’s pledge to halt licences altogether
It is important to have a coherent policy, as opposed to adopting piecemeal approaches or considering extreme measures like the Labour Party’s pledge to stop issuing licences altogether.
Piecemeal extensions, granted on a year-by-year basis, can create uncertainty. Such uncertainty can impede long-term planning and investment decisions, as companies require a stable and predictable regulatory environment to make responsible and efficient use of existing oil and gas fields.
Stopping licences altogether, as proposed by some political factions, would be counterproductive. A sudden and complete cessation of licensing could have severe economic consequences. It might negatively impact the energy sector, leading to job losses, reduced investments, and potential energy shortages. This approach may also hinder the UK’s ability to maintain a secure and reliable domestic energy supply.
The call for a coherent policy implies the need for a well-thought-out and holistic approach to the energy transition. Such a policy should consider the broader economic, social, and environmental implications, ensuring a balance between achieving net-zero targets and maintaining energy security.
Coherence creates a supportive framework that encourages investment in renewable sources while managing the gradual phase-out of fossil fuels.
Francesco Mazzagatti emphasises the need for better processes in four key areas
Improving Efficiency: All parties involved should focus on enhancing the efficiency of existing energy processes and systems. This can call for adopting new technologies, optimising operations, and making current energy production and consumption processes more streamlined and effective. Improved efficiency is crucial for maximising the output of energy systems while minimising waste, ultimately contributing to a more sustainable and cost-effective energy landscape.
Reducing Emissions: We must deeply recognise the environmental impact of traditional energy sources, particularly in terms of greenhouse gas emissions. By emphasising the need to reduce emissions, Mr Mazzagatti advocates for measures that mitigate the environmental footprint of current energy practices. This could involve implementing cleaner technologies, enhancing carbon capture and storage methods, and adopting practices that minimise harmful emissions.
Innovate and Develop Sustainable Sources: This highlights the importance of innovation in the energy sector. There should be an uncompromised commitment to exploring and implementing new technologies and methods that align with sustainability goals. This innovation may involve the development of renewable energy sources such as solar, wind, or tidal power, as well as advancements in energy storage, distribution, and smart grid technologies. The emphasis on sustainability indicates a long-term commitment to energy sources that are environmentally friendly and capable of meeting future demands without compromising the well-being of the planet.
Immediate Efforts: The use of the term “immediate efforts” suggests a sense of urgency. Action needs to be taken promptly to address current challenges and opportunities in the energy sector. By prioritising efficiency improvements, emission reductions, and sustainable innovations, we can utilise a proactive and dynamic approach to the energy transition.
Final thoughts
In brief, the UK’s recent allocation of North Sea licences aims to enhance energy security and reduce dependence on foreign imports. Mr. Mazzagatti supports the move but urges a more forward-looking government policy approach. Emphasis on a reliable domestic energy source aligns with the transition to greener alternatives, despite continued reliance on oil and gas post-2050.
Urgent calls for extended licences and transparent production visibility seek responsible resource extraction and continued investment. Mr. Mazzagatti advocates for an inclusive collaboration, and for the necessity for generous financial incentives supporting carbon capture and zero-emission hydrogen production for a sustainable UK energy future.