Why oil and gas are here to stay

The clean-energy transition is based on magical thinking

UK prime minister Rishi Sunak confirmed this week that he will issue 100 new licences to firms looking to drill for oil and gas in Britain’s North Sea. He has also confirmed millions of pounds of funding for the Acorn project, a carbon-capture-and-storage scheme in St Fergus, Aberdeenshire. Acorn aims to capture CO2 generated from oil refineries, pipe it from central Scotland to the coast and store it in depleted gas reservoirs under the North Sea.

What Sunak’s move underlines is that Britain and the world have no real prospect of shrugging off oil and gas as sources of energy any time soon. ‘Even when we’ve reached Net Zero in 2050’, Sunak says, ‘a quarter of our energy needs will come from oil and gas’. What’s more, switching fossil-fuel supply to overseas companies would add to import bills, he argues. It could also lead to a carbon footprint ‘two, three [or] four times’ as great as would be generated by keeping oil and gas production in the UK.

While we shouldn’t take Sunak’s statistics at face value – no one actually knows what the UK’s energy needs will be in 2050, for one thing – he is right on the bigger picture. Oil and gas are here to stay, and for good reason.

Of course, we’re all familiar with the environmentalist narrative that says otherwise. Greens insist that the world is already engaged in an ‘energy transition’ – an inexorable global turn away from fossil fuels toward renewable sources of electricity, plus a move away from petrol cars toward electric vehicles (EVs).

And so Sunak’s approval of oil licences has inevitably been portrayed as a step backwards by Britain’s sizeable green lobby. Just Stop Oil has branded Sunak a ‘climate criminal’. Conservationist and TV presenter Chris Packham said Sunak’s announcement marked a ‘dark day for life on Earth’. Even the prospect of some of the North Sea’s CO2 emissions being captured was not enough to satisfy Friends of the Earth Scotland, which condemned the Acorn project for helping to ‘prolong [the] climate-wrecking’ oil and gas industry.

These people talk as if the movement towards ‘clean energy’ is already a done deal for the rest of the world. They say Sunak is turning the UK into an outlier, refusing to decarbonise our energy in line with everyone else. Global investment in renewables is increasing, we’re told. Fracking for oil and gas is banned in Europe. According to green academics at the UK Energy Research Centre, ‘Denmark, France and Ireland have already declared a halt to licensing and pledged a managed phase-out of oil and gas production’. Meanwhile, the International Energy Agency (IEA) argues that no new oil and gas fields, beyond those already approved, will be required to meet demand for energy when the world reaches Net Zero emissions by 2050.

But none of this paints the full picture. First, Asia will continue to use fossil fuels as a means of generating electricity. Energy consultancy Wood Mackenzie, which is optimistic about the world achieving Net Zero, notes that more than half of Asia’s power supply still comes from coal, with China building 100GW of coal-fired power plants in 2022 alone, and Japan now favouring ‘clean coal’ plants, too. Its analysis also finds that Asia’s demand for oil and gas ‘looks robust’. It estimates that Asian demand for oil will grow by 10 per cent over the next decade, even if China’s prowess in EVs and fuel efficiency helps Asia’s total demand for oil peak in 2033. ‘Transforming Asia’s energy systems’, the analysts concede, ‘is a monumental challenge’.

Second, worldwide demand for oil last month surpassed its last peak – a pre-Covid 102.3million barrels a day, reached in August 2019. Indeed, the Organisation of the Petroleum Exporting Countries (OPEC) believes that global oil demand will rise to 110million barrels a day in about 20 years.

Lastly, the IEA’s insistence that no new oil and gas fields will be needed to power the world is nonsense. In its analysis, almost half of the emissions cuts it anticipates by 2050 ‘depend on technologies that are at the prototype or demonstration stage’ – that is, technologies that ‘are not yet available on the market’.

In order to meet the Net Zero target by 2050 and to keep oil and gas in the ground, the IEA envisages mass behaviour change to reduce energy demand and CO2 emissions. This would involve hundreds of millions of people across the world taking up ride sharing, keeping their central heating down below 20 degrees Celsius or only turning their air conditioning on when temperatures rise to 24 degrees, among other things. This just isn’t going to happen. If governments attempt to impose these changes, they will undoubtedly be met with fierce resistance.

So what about those technologies that do exist? We already have EVs to replace petrol cars and heat pumps to replace gas boilers. But these are not being adopted on anything like the scale that would be needed to dent the demand for oil and gas. For instance, in 2022, there were fewer than 30million EVs on the world’s roads. Without the mass behaviour change the IEA wants to see, that number would need to rise to about one billion by the end of this decade. And that too just isn’t going to happen.

What the green establishment refuses to admit is that the world will need more fossil fuels, not less, in the future. Granting additional licences in the North Sea is a good place to start, but we will need to be far more ambitious if we are to meet our growing energy needs.

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