Oil and gas producers that fail to commit to reducing their emissions to “net-zero” could face being rejected for North Sea drilling licences.
The government’s new business secretary, Kwasi Kwarteng, said companies would only get government backing if they took decarbonisation “very seriously indeed.”
The news comes amid a mounting tide calling for firms to clean up their act, as the government looks for ways to hit its targets to reach net-zero by 2050. It said in last month’s energy white paper that North Sea licensing would have to fall in line.
The Telegraph reported Kwarteng said at the Westminster Energy Forum before his promotion this month: “All the conversations I’ve had with Energy UK and the Oil and Gas Authority, I talk about quid pro quo; something for something. That quid pro quo means that government support is only going to be there if they take decarbonisation very seriously indeed.”
The Department for Business, Energy and Industrial Strategy spokesperson said: “The Business Secretary rightly set out how our review into the future of the oil and gas licensing regime seeks to ensure it remains compatible with our target to reach net zero emissions by 2050. This commitment also forms part of the Energy White Paper published last month.
“We will agree a transformational North Sea Transition Deal with industry in the coming months to create jobs, retain skills and deliver new business and trade opportunities to support the sector’s transition to a lower carbon future.”
Governments and campaigners alike have been putting pressure on companies to change how they do business with regards to climate change.
Last week, shareholders began to ratchet up demands for HSBC (HSBA.L) to back up pledges it made to reach net-zero by 2050. A resolution tabled by a group of shareholders noted that the bank has not made any specific pledges to reduce its funding for fossil fuels.
Oil giant BP (BP.L) has also resolved to cut emissions, with the company’s CEO Bernard Looney saying that his plans to shift the company away from fossil fuels and towards renewable energy is in the long-term interests of shareholders.
Looney is will be under pressure to prove a new model can work for oil companies. Oil prices have dived this year, after the COVID-19 pandemic led to plummeting demand for fuel. BP was forced to write-down the value of its business by billions of dollars earlier this year and is in the process of axing 10,000 jobs around the world.