No energy policy is complete without looking at the central role to be played by the oil and gas industry, UK junior energy minister Charles Hendry said late Wednesday.
He said the government's upcoming gas generation strategy -- to be launched in the autumn -- would clarify the role of gas in light of the "unprecedented challenge" faced by the UK in rebuilding its ageing energy infrastructure.
Hendry noted that while the liberalization of the UK energy market had delivered some of the lowest consumer bills in Europe, it did not bring the investment in infrastructure that the government expected, now leaving as much as GBP200 billion ($322 billion) required by 2035.
The earliest that the country can expect new nuclear plants to come online is 2019, while full-scale carbon capture and storage (CCS) and wind power generation may only be viable in the 2020's, Hendry said.
"The pinch point is before then. New nuclear, CCS and renewables are important but we must look at the role of gas," he said.
NORTH SEA FOCUS
Part of the new gas strategy would address the declining reserves in the UK's North Sea and the challenges and opportunities this presents, Hendry told reporters.
"The North Sea is in decline, but the rate of decline is where there is a clear national interest," he said.
Hendry said there remains "immense interest" in the North Sea but that the interested companies were no longer oil majors but smaller independent exploration and production units.
"The workstreams must encourage this," he said, adding that greater access to capital, infrastructure and harnessing of technology must be made available.
The government intends to refocus the PILOT scheme, a joint program between the UK government and oil and gas players, to foster greater co-operation in the future of the North Sea.
A key opportunity offered by the UK's declining reserves is in developing technology to be used in mature basins earlier than others.
"We're dealing with these problems first," said Hendry, "Companies that develop these technologies can take them elsewhere."
Hendry showed resistance towards European Commission regulation of offshore safety standards, but recognized the case for a directive.
"We defend our approach to regulation, but we don't rest on our laurels," he said. He added that UK offshore regulation is subject to constant improvement and implementation of best practice but that replacing this with EC regulation could undermine current standards.
"Tinker at your peril," he added.
HOLISTIC APPROACH
Hendry said the new gas strategy must be seen alongside development of the CCS industry in the UK as part of a holistic energy policy.
"We are very committed indeed to renewables, but balance is needed," he said.
The government has recently relaunched a competition to make funds available to the emerging CCS industry after the collapse of the initial plan.
The biggest change, said Hendry, is that the government will take an inclusive view of CCS development rather than supporting isolated pilot projects.
