Submission to the inquiry on ‘The future of the oil and gas industry’ by the House of Commons Select Committee on Scottish Affairs


This submission was made to the House of Commons Select Committee on Scottish Affairs’ inquiry on the future of the oil and gas industry in July 2018.

The submission focuses on the implications for the oil and gas industry in the UK, including Scotland, of the transition to low-carbon economic growth. In particular, it highlights the need for the Government’s Industrial Strategy to reconcile its ambitions for the oil and gas sector with the ‘Clean Growth’ Grand Challenge.

Key messages

  • The implications of the low-carbon transition for the UK oil and gas sector, which is a major strategic issue, are not yet receiving adequate attention from the research community.
  • While carbon capture, usage and storage may eventually allow the continued consumption of some natural gas for electricity generation while also meeting goals for reducing emissions of greenhouse gases, it does not appear to be viable for the consumption of oil and its products for transport.
  • The combination of domestic and international targets for emissions reductions – e.g. via plans in a number of countries to ban the sale of new diesel and gasoline vehicles – could have a significant impact on demand for UK oil and gas over the next few decades.
  • Delaying any consideration of the consequences for jobs may result in a more difficult transition for communities that currently rely on the oil and gas sector for employment.

Recommendations

  1. Government should ensure that the sector deal for oil and gas includes an explicit recognition of the sector’s need to consider how the low-carbon transition will impact investors, businesses and workers.
  2. Government should earmark some of the Industrial Strategy Challenge Fund to support for research and analysis on the potential implications of the low-carbon transition for the sector, and options for managing the transition.
  3. Government should build on the recent recommendation of the Green Finance Taskforce to foster inclusive prosperity at the local level and develop place-based green financing plans for regions exposed to the impacts of the low-carbon transition on the oil and gas sector, drawing on inputs from leading UK banks and investors.