Overview of Part 2

Energy Bill [Lords] – in a Public Bill Committee at 11:30 am on 28 January 2016.

Alert me about debates like this

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

Clause 19 stand part.

New clause 8—Regulation of carbon storage activity—

‘(1) The additional functions of the OGA related to offshore petroleum provided for by Part 2 of this Act, shall also be exercisable by the OGA in relating to the carbon storage activity of holders of offshore licences and licensees as defined in section 19.”

This amendment would extend the functions that the OGA has in relation to holders of offshore petroleum licences, so that they also apply to carbon capture activities by those licensees.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Energy and Climate Change)

The purpose of new clause 8 is to ensure that where activities relating to either carbon capture and storage or carbon storage take place in the North sea in the future, the regime relating to those licensed activities would be the same as the regime currently in place for other activities under the Bill.

There is a reason why I think that that is potentially important at a stage earlier than might otherwise be thought—bearing in mind that at the moment there is no carbon capture and storage, and therefore one might think that regulating to make compatible activities of the two kinds would be rather far off. Nevertheless carbon storage is mentioned in its own right. It is more than possible to introduce carbon storage into the North sea process without a full carbon capture and storage process being under way. That would be particularly relevant in the context of enhanced oil recovery.

Clearly, one thing that should be a consideration is the extent to which enhanced oil recovery might become part of the process of maximising the economic recovery of the North sea as a whole. From the guidance about what, in strategy, maximum economic recovery looks like, it appears that carbon storage or other forms of injection to enhance that oil recovery might well become part of the consideration. If a number of wells are effectively close to depletion the injection in various ways of different kinds of materials, but particularly carbon dioxide, could be a part of considerably lengthening the life of the field.

More academic studies have shown—I commend one in particular, called “CO2 storage and enhanced oil recovery in the North Sea”—that with various kinds of injection the ability to enhance recovery can be quite considerable. Injection can take several different forms. It is not just a question of CO2 injection; it could be sea water, it could be CO2 only or it could be mixtures in various proportions. One is water alternating gas, for which I understand the acronym is WAG; I must say that I thought WAG injections meant footballers’ wives going to get their top-up of botox, but it turns out that they are not that at all. We could also have simultaneous water alternating gas—SWAG—which we will not go into any further.

The point that I am trying to make is that a number of different techniques can enhance oil recovery. Some, but not all, would involve CO2, but all of them would be enhanced if it was injected as part of the process. The processes do not necessarily depend on a fully formed carbon capture and storage process, although injection for enhanced oil recovery is part of the process at the world’s first fully operational, down-the-line carbon capture and storage facility, at Boundary Dam, in Saskatchewan. However, it is feasible, for example, to bring carbon dioxide to an oilfield by other means and to inject it, without having the full line developed.

It is therefore possible, in the context of carbon capture and storage as a future arrangement, that such processes will come upon us rather earlier than we might think. Academic studies certainly suggest that, depending on the arrangement involved, the enhancement of recovery can vary between 1.5% and 10%, which is by no means negligible.

It would, therefore, probably be a good idea, at an earlier rather than a later date, to bring processes relating to carbon storage into line with what is happening elsewhere in the Bill. That is essentially what the new clause seeks to do, so that, when the various elements of the Oil and Gas Authority’s oversight of these processes are looked at, there is a clear line of sight between present arrangements relating to oil and gas and future arrangements relating, in particular, to carbon dioxide storage.

Photo of Andrea Leadsom Andrea Leadsom The Minister of State, Department of Energy and Climate Change

Good morning, Mr Davies.

New clause 8 would extend the OGA’s functions in part 2 of the Bill to the carbon storage activities of an offshore petroleum licensee. I absolutely understand the hon. Gentleman’s intention in seeking to make the most of the opportunity presented by the Bill, but those who undertake carbon storage activities must have a carbon dioxide storage licence, not an offshore petroleum licence. The activities he mentioned would therefore be undertaken under a carbon dioxide storage licence, not an offshore petroleum licence. It is therefore unlikely that an offshore petroleum licensee would ever undertake carbon storage activities. I am afraid to tell him that the new clause is therefore flawed.

I would, however, like to assure Committee members that, under MER UK—the maximising economic recovery UK strategy—the OGA is considering CO2 enhanced oil recovery as part of wider EOR work. CO2 EOR could make a substantial contribution, as the hon. Gentleman rightly pointed out, to lowering the cost of CCS projects, as well as benefiting North sea revenues and jobs. However, more analysis is needed on the timing of future CCS projects and how they might affect CO2 EOR development, and on the viability of redeveloping abandoned fields as CO2 EOR projects.

The OGA will collaborate with the CCS industry and foster innovation in EOR technologies. Specifically, it has already planned work on EOR, including on advancing the next tranche of EOR technologies and developing a framework for their economic implementation. It will also develop a CO2 EOR strategy and a five-year plan during 2016.

I am afraid that I must tell Members that, as the Bill is drafted, the OGA could apply the powers in part 2 to any activity carried out under an offshore petroleum licence. If an offshore petroleum licensee undertook preliminary work under an offshore petroleum licence, with a view to applying for a carbon dioxide storage licence, that work would be within the scope of the powers in part 2. That could include any activity that might relate to carbon storage for which a carbon storage licence was not necessary—for example, laying a new pipeline to transport petroleum that in future might be reused for carbon dioxide transportation.

For those reasons, I suggest that this new clause does not achieve its intention, and furthermore that the existing drafting of part 2 of the Bill achieves the intention that the hon. Gentleman desires, inasmuch as it possibly can. I hope that all hon. Members will accept my explanation for why this new clause is unnecessary and inappropriate. I hope the hon. Gentleman will be content to withdraw it.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Energy and Climate Change)

I thank the Minister for that full response to the intent of the new clause. Although I am happy not to press it, in part on the basis of the explanation provided by the Minister, I still have a slight reservation. There is a specific clause in the Bill that states that people may have carbon dioxide storage licences. Since that clause exists, the intent of the new clause was to link the fact that one was not just undertaking activities pursuant to the idea that one might have a carbon storage licence but to link in the activities when that licence was issued.

The fact is that we are not in a position, as far as this Bill is concerned, of there being no interest in carbon dioxide storage licences, because there is a clause that specifically states that such licences can be obtained and used. Following from that, it therefore seems in principle reasonably logical that one ought to tie in a process when that licence has been obtained of considering the consequences of that licence, as far as the other provisions of this Bill are concerned.

My intent in tabling the new clause was not, as it were, to jump ahead of the Bill and to start putting in provisions that were inappropriate for what is already there, but to add to what is in the Bill already and to try to bring that into line with what the Bill states.

The Minister states that, certainly as far as activities pursuant to obtaining a licence are concerned, what goes on at present in this Bill is fully covered in terms of what those activities might represent, but it is that further area that remains a concern of mine. The new clause may well be drafted insufficiently well to undertake fully that linkage activity. However, I remain concerned that, since there is already something there, at some stage that ought to be linked in with how the Bill operates.

Question put and agreed to.

Clause 18 accordingly ordered to stand part of the Bill.

Clause 19 ordered to stand part of the Bill.

Clause 20