6. Fuel supply
- Reducing emissions from oil and gas production. The main opportunities for emissions reduction in the sector come from the electrification of oil and gas platforms and measures to minimise emissions from methane flaring and venting. By 2030, we expect emissions reductions of at least 50% from offshore oil and gas supply, given the ambitions of the North Sea Transition Deal and the Net Zero Strategy as well as the significant falls in North Sea output that are anticipated.
- Both total emissions from oil and gas production and the emissions-intensity of production are relevant indicators, as emissions are strongly correlated with (uncertain) production levels. There need to be significant reductions in the emissions-intensity of oil and gas production in the 2020s, as well as major reductions in emissions in absolute terms.
- Our new indicators will help track progress in fossil fuel supply by capturing the effects of low-carbon energy use on oil and gas platforms and processing terminals, as well as the changes in flaring and venting. As more relevant data become available, we intend to update our indicators and develop new ones to track emissions reductions in refineries from the uptake of CCS capacity and demand.
- Low-carbon hydrogen supply. As the UK does not currently produce substantial amounts of low-carbon hydrogen, the challenge in this sector is to build a feasible system to deliver hydrogen at scale, which will require the creation of markets and the development of infrastructure. In our ‘delivering a reliable decarbonised power system ’ report published in 2023, we developed a set of indicators that will be used to track progress in low-carbon hydrogen production and storage.
- Biomass supply. Following the UK Government’s Biomass Strategy, we will develop a set of indicators to track progress on biomass supply and deployment of uses compatible with Net Zero.
How we monitor fuel supply
Emissions reduction in the fossil fuel supply sector comes mainly from reducing the production of fossil fuels and reducing the emissions-intensity of this production. Alongside this, it is essential to drive down demand for fossil fuels across the energy system, through substantial improvements in energy efficiency, strong deployment of zero-carbon energy sources and electrification where this is feasible.
Even as unabated use of fossil fuels is phased out across the energy system, some remaining use of fossil fuels is likely to be required with carbon capture and storage (CCS), for example in hydrogen production and/or electricity generation. In order for the lifecycle emissions savings of these solutions to be compatible with Net Zero, upstream emissions from fossil gas production must be kept to a minimum.
- The monitoring map for fossil fuel supply reflects this through its three main branches: the first allocates the key approaches to reduce emissions from oil and gas production, the second covers the main action to reduce emissions from refineries, and the third covers emissions reductions associated with methane leakage from gas distribution and transmission (Figure 6.1).
- Emissions in the sector are expected to fall, as fossil fuel consumption and supply declines, and as the carbon-intensity of refineries and production of oil and gas is reduced via policy measures.
The monitoring map shows how Government policies, supported by relevant contextual enablers, can put in place the conditions for success required to realise the outcomes that deliver the transition.
- Achieving the necessary sharp falls in emissions from oil and gas production will require reducing the emissions-intensity of production alongside the anticipated decline in production volumes. Reduction in the emissions-intensity of production can be achieved through reduced venting and flaring of gas, together with electrification of oil and gas platforms using offshore wind power and/or connection to the grid.
- The key policy to decarbonise direct emissions of flaring and venting practices from offshore oil and gas platforms and onshore processing terminals is to implement strict regulations to prevent fugitive methane emissions for reasons other than safety. Initiatives exist to drive these reductions in methane emissions, such as the methane action plan and global methane pledge.
- Government action will be required to support low-carbon energy use in upstream oil and gas through the integration of offshore wind and/or the onshore grid to oil and gas platforms.
- As the transport sector increasingly electrifies, demand will fall for refined fuels. Alongside this, policy is required to reduce the carbon-intensity of refining including through deployment of carbon capture and storage (CCS).
- Reducing emissions from the gas networks requires policy to minimise leaks, through the iron mains replacement programme, which replaces old iron pipework with modern plastic pipes, as well as increasing the proportion of low-carbon gas (e.g. biomethane) being used in the system. However, as demand for natural gas falls and the need for networks to transport hydrogen emerges, it may be necessary to consider prioritisation of iron main replacement.
Within the fuel supply sector, key priorities include complementing electrification through the development of a new market for low-carbon hydrogen and making bioenergy supply and use sustainable and compatible with Net Zero (e.g. through use of bioenergy with carbon capture and storage – BECCS):
- Deployment of low-carbon hydrogen production requires financial support for production facilities, at least in the early stages of a hydrogen market, together with incentives to ensure that there is demand for the hydrogen and infrastructure to ensure that it can be transported and/or stored as required. A low-carbon production standard is also necessary to ensure that hydrogen that is supported by policy is sufficiently low-carbon.
- Bioenergy can play an important role in achieving Net Zero, using sustainably produced biomass primarily in some form of BECCS application. On the supply side, it is important for as much of the biomass feedstocks as possible to be domestically grown, subject also to ensuring other land-use objectives such as food security, to limit potential perverse outcomes of UK climate policy on land use and greenhouse gas emissions in other countries. Governance is crucial in this sector, both for domestically-grown feedstocks and for imports, with strong sustainability criteria.
Figure 6.1 Monitoring map for fossil fuel supply
Source: CCC analysis
This section sets out the indicators we will use in our progress monitoring for the sector. For each indicator we assign an ID number and identify a current data source. We explain why each indicator is important and what we are looking to see in our monitoring. The historical data and, where available and relevant, the benchmark trajectories against which we compare them are presented in the supporting data alongside our Progress Reports. We discuss policy needs (flagged as ‘Policy’) alongside the most relevant outcomes and enablers. Specific recommendations are made in our annual progress reports to Parliament.
The Government plans new fossil fuel production in the North Sea, as set out in the Energy Security Strategy. There is significant uncertainty over future production levels, so our indicators are relatively high-level. In future, we intend to develop a wider set of indicators for fossil fuel supply and a framework of indicators to track progress in the bioenergy sector.
Required outcomes: Reduced emissions-intensity of oil and gas production
Indicators: emissions-intensity of oil and gas production
- The emissions-intensity of oil and gas production needs to be reduced significantly, alongside considerable projected falls in output, meaning even sharper declines in emissions from oil and gas production in absolute terms. The Government and industry committed to a reduction in these emissions of 50% by 2030 on 2018 levels as part of the North Sea Transition Deal, although this does not go as far as the 68% reduction the CCC estimated to be feasible in our Balanced Net Zero Pathway.
- We track both total emissions from oil and gas production and the emissions-intensity of production, as emissions are strongly correlated to (uncertain) production levels.
- The emissions-intensity indicator is based on oil and gas production projections produced by the North Sea Transition Authority. We assume the same level of production out to 2037 under the Government trajectory and our Balanced Pathway.
- All sources of emissions from oil and gas platforms and processing terminals, including LNG terminals and compression stations, are covered in the indicator. We assume that the Government pathway includes emissions from LNG terminals and compression stations, but that these emissions are not abated. As such, these figures represent our own estimates rather than the definite emissions-intensity trajectory under the Net Zero Strategy.
- We also note that emissions in our Balanced Pathway scenario do not consider the impact of the Covid-19 lockdowns on oil and gas production since 2019.
- The emissions-intensity indicator provides a direct measure of upstream oil and gas emissions per unit of energy produced.
- Without action to limit emissions, the intensity is likely to increase as output declines (i.e. emissions from older fields will not fall as sharply as output).
- Action to reduce intensity includes reduced venting and flaring of gas, together with electrification of platforms to avoid the unabated combustion of fossil energy currently used.
- Policy. Policy will be required to achieve this, through a combination of regulation and incentives. Some measures may be taken up more quickly on new platforms relative to those on existing platforms.
Required outcome: Increased hydrogen production and storage
Indicators: Hydrogen supply
ID: FS8, FS9, FS10, FS11, FS12, FS13, FS14
- Hydrogen has a crucial role to play in decarbonisation of the energy system. It will be needed for hard-to-decarbonise sectors such as industry and shipping and is expected to have a role in power generation, although the scale remains uncertain. The Energy Security Strategy has committed to deliver 10 GW of low-carbon hydrogen production by 2030, and the results of the modelling in our ‘delivering a reliable decarbonised power system’ report suggest that this may be on the lower end of what could be required.
- To monitor the progress of a system to deliver hydrogen at scale, we track the following indicators:
- Low-carbon hydrogen production (TWh), where the most relevant routes for UK production are electrolysis, methane reformation with CCS and biomass gasification with CCS.
- Low-carbon hydrogen production de-rated capacity (GW) by tracking capacity in operation, under construction and in development.
- Hydrogen storage capacity (TWh) by tracking capacity in operation, under construction and in development. Examples of storage technologies include salt caverns and pressure tanks.
We recognised that the lower bounds of the hydrogen indicators presented in our ‘delivering a reliable decarbonised power system’ report had the potential to be further reduced where heating is fully electrified or where there is a lesser role for hydrogen in managing the power system. We have since updated the lower bounds of our hydrogen indicator ranges to reflect these scenarios.
Planned updates to the indicator framework
Our approach for monitoring progress in fuel supply is evolving, and we anticipate adding the following indicators to our framework:
Fossil fuel supply indicators
- Share of electricity use on oil and gas platforms. This indicator will track progress in the electrification on oil and gas platforms through its integration with wind power and/or grid electricity.
- Routine flaring and venting. This indicator will track emissions from flaring and venting against the requirements in the North Sea Transition Deal and Global Methane Pledge.
- Methane leakage from the gas network. This indicator will be useful to monitor the effectiveness of the iron mains replacement and of technologies for methane leakage detection in the gas networks.
- Reduced emissions-intensity of refineries. This indicator will track decarbonisation of refineries through measures to reduce emissions (e.g. deployment of carbon capture and storage), independent of expected reductions in refinery emissions due to falls in output (e.g. as a result of falling demand for oil products as the transport sector decarbonises).
Indicators on bioenergy
Once the Government has published its Biomass Strategy, we will also be in a position to develop indicators on bioenergy.
There are also areas where lack of reliable and accurate data impedes our ability to measure progress. Here are the data gaps we have identified for the fossil fuel supply sector. These will be added to our framework when credible data sources are available.
- Carbon-intensity measurement standards. The NSTA has previously published data on the emissions-intensity of oil and gas production that only included the subset of emissions that are covered by the UK emissions trading scheme (UK ETS). The Government should publish data on the carbon-intensity of fossil fuel production covering all sources of greenhouse gases (i.e. all gases, and including all emissions from oil and gas platforms and processing terminals) rather than simply CO2 emissions covered by the ETS.
- Energy use for oil and gas. There are no detailed and credible public data of energy use in oil and gas platforms. We would like to track what type of energy source and how much is being used for electricity and heat generation, correlating it with the way energy use impact on emissions.
- Flaring and venting. Due to the lack of monitoring and quantification of emissions from flaring and venting, there is a data gap to track the progress of industry initiatives to reduce flaring and venting.
 This should include emissions associated with compression stations used on oil and gas platforms as well as LNG terminals