UK North Sea Transition Deal outlines £10bn for hydrogen

Author: Jake Stones

2021/03/24

LONDON (ICIS)--On 24 March the UK government announced the North Sea Transition Deal , an agreement with the oil and gas industry that aims to support decarbonisation of the fossil fuel sector, including the potential for £10bn to be invested in hydrogen.

The plan aims to harness existing capabilities, infrastructure and investment to promote new technologies such as hydrogen, carbon capture usage and storage (CCUS) and offshore wind, as well as decommissioning existing assets.

Oil and gas production in the UK Continental Shelf (UKCS) is responsible for around 3.5% of the country’s emissions.

It commits to joint funding for emissions reduction from the state and sector of up to £16bn by 2030.

Of this £3bn will replace fossil-fuel power supply to UKCS platforms with renewable energy, another £3bn will be used for CCUS, with up to £10bn available to support hydrogen production.

Current government funding plans include £1bn to establish CCUS at two industrial clusters by the mid-2020s including Project Acorn, which aims to establish CCUS at the St Fergus gas entry point by 2023.

UK HYDROGEN PRODUCTION

On 23 March the UK Oil and Gas Authority released plans to make the Bacton entry point a key hydrogen hub , utilising UKCS assets to develop production for London and the southeast.

The findings for Bacton note that blue hydrogen is likely to be the most commercially viable supply source in the 2030s and early 2040s, while green hydrogen is expected to become cost competitive around the 2040s and 2050s, the Oil and Gas Authority stated.

On 18 March UK transmission system operator (TSO) National Grid announced further details of Project Union, which aims to convert 25% of the country’s gas network to carry hydrogen by 2030.

It stated this could account for at least a quarter of UK gas demand.

On the same date British energy major BP announced plans for a 1GW hydrogen production facility at the Teesside industrial cluster by 2030.

H2Teesside could meet 20% of the UK government’s target of 5GW of low-carbon production capacity by 2030, according to the prime minister’s 10 point plan released in November last year.

There are also large-scale plans for blue hydrogen generation in the northwest. The HyNet project could have 300MW of capacity by the middle of the decade, with potential for a further 1,500MW by 2030.

UKCS PRODUCTION

According to data released by the UK Oil and Gas Authority, UKCS gas production is due to fall to 17.8 billion cubic metres (bcm)/year by 2030, down from a projected 33.2bcm in 2021.

The UK Oil and Gas Authority also projects that net gas demand by 2030 will drop to 60.9bcm, down from 67.6bcm expected this year.