How can Procurement Respond to UK Oil & Gas Guidance?

Burning oil and gas releases significant amounts of carbon dioxide (CO₂) and other greenhouse gases (GHGs), exacerbating global warming.

As such, procurement executives within the oil and gas industry face increasing responsibility to align their supply chain strategies with sustainability principles, mitigating emissions and minimising their environmental impact.

Now, the UK Government has issued new guidance on considering applications for oil and gas projects, impacting future procurement decisions.

Procurement leaders need to incorporate the assessment of emissions into their strategic planning, as new environmental impact assessments will require a comprehensive evaluation of both production and full life-cycle emissions, including those released during use.

Supplier compliance and environmental strategy

Operators are now being tasked with developing detailed environmental impact assessments that encompass emissions resulting from the use of oil and gas, not just production.

This new regulatory requirement presents an opportunity for procurement departments to re-evaluate their supplier compliance and environmental strategies.

With these guidelines, projects like the Rosebank and Jackdaw face scrutiny, with procurement professionals needing to ensure suppliers align with new emission consideration protocols.

The energy sector's procurement executives must stay informed of government mandates, particularly how they affect project approvals in regions like Scotland.

Energy Minister Michael Shanks emphasised that this guidance brings clarity essential for the North Sea oil and gas industry’s transition to a clean energy future.

He stated: "This new guidance... marks a step forward in ensuring the full implications of oil and gas extraction are considered for potential projects and that we ensure a managed, prosperous and orderly transition to the North Sea's clean energy future, in line with the science."

Industry stakeholders, including suppliers and contractors, must adapt to these changes as they plan their logistics and supply chain moves.

Michael added: "We are working with industry, trade unions, local communities and environmental groups to ensure the North Sea and its workers are at the heart of Britain's clean energy future for decades to come, supporting well-paid, skilled jobs, driving growth and boosting our energy security."

Impact of Scope 3 emissions on procurement

The introduction of new regulatory guidance follows a landmark Supreme Court ruling mandating full climate impact consideration, including Scope 3 emissions, which are the emissions caused by the extraction, transportation and eventual burning of the fuel.

For procurement professionals, this ruling necessitates a holistic view of supply chain emissions, influencing the selection and vetting of suppliers and partners for projects like Rosebank and Jackdaw.

Procurement teams must now align their operations with legal requirements and incorporate sustainability metrics into their supplier selection processes.

The Supreme Court's decision retroactively affects existing projects, such as Shell’s Jackdaw and the Rosebank oil development, necessitating new consent based on updated assessments.

This change underscores the necessity for procurement officials to proactively adjust strategies to meet compliance deadlines and ensure alignment with new environmental regulations.

Aligning procurement with climate commitments

The Offshore Petroleum Regulator for Environment and Decommissioning and the North Sea Transition Authority had temporarily paused new drilling and existing license reviews, pending government clarification.

Now, with guidance in place, procurement executives must re-engage suppliers for re-evaluation and potential new agreements under these stricter guidelines. Energy Secretary Ed Miliband has highlighted the importance of factoring in Scope 3 emissions into procurement decisions, labelling some projects as "climate vandalism."

Procurement executives must assess projects on any environmental impact they could have vis-à-vis economic benefits, considering the government's desire to account for all emissions in future assessments.

As John Swinney, the First Minister, noted, this approach syncs with the government’s position that encourages a full emissions review before making procurement decisions on future projects.

Meanwhile, climate groups continue to call for transparency and accountability from the industry, which, in turn, pressures procurement departments to reflect these values in supplier selection and overall purchasing behaviour.

Tessa Khan of climate group Uplift captured this urgency: "In the case of the Rosebank oil field, which Equinor can now seek reapproval for, it is overwhelmingly obvious that the project is incompatible with the UK's climate commitments."

As firms like Shell and Equinor work within these new frameworks, the role of procurement becomes ever-crucial in navigating the complexities of legislative compliance while strategically advancing energy security goals through innovative, emissions-conscious supply chain solutions.

Explore the latest edition of Procurement Magazine and be part of the conversation at our global conference series, Procurement & Supply Chain LIVE.

Discover all our upcoming events and secure your tickets today. 

Procurement Magazine is a BizClik brand.