Kwasi Kwarteng is looking to classify as natural gas as a ‘green investment’ in a bid to ramp up North Sea production in line with government aspirations.
The Business Secretary is reportedly keen for fossil fuel drilling to be listed as “environmentally sustainable, according to The Telegraph.
It would be newly classified in a list of energy activities being assembled by his department and the Treasury to guide investors.
The move comes amid concerns banks and pension funds are ditching natural gas projects to ensure portfolios line up with climate change goals.
Producing and burning natural gas for power production and heating remains a vast source of carbon dioxide emissions, but it is also considered a key transition fuel in the shift from coal and oil to renewables.
North Sea oil and gas exploration was also a key feature in the UK’s energy security strategy, which the government unveiled last month, as it looks to reduce its reliance on overseas suppliers.
The UK would not be the first country or trading bloc to reclassify fossil fuel projects, with the European Union (EU) defining selected natural gas projects as green investments last year on that basis.
A Whitehall source told the Telegraph: “Kwasi considers natural gas a transition fuel, and he accepts the reality of the situation which is that we will need gas for decades to come and we need more developments in the North Sea.”
“A lot of investors with ESG targets are divesting from fossil fuels – we don’t want that to be done at the detriment of natural gas.”
UK grapples with supply security as energy crisis deepens
Over the past decade, the UK has completed an historic shift from coal to gas, with gas providing almost 40 per cent of the UK’s energy mix, while a quarter comes from wind power.
The UK has strict carbon emission reduction targets but natural gas is likely to have a continued role in electricity production, especially if coupled with technology to strip out carbon emissions.
Fossil fuels are also maintaining their role in the UK energy mix to ensure supply security this winter, and to prevent an unstable shift to green power without sufficient energy sources to bridge the gap.
The country has also kept three coal power stations operational, and the government has requested Drax Group (Drax) postpone the closure of its two remaining coal units at its plant in Selby, North Yorkshire, which are set for decommission in September.
Neverthless, the reliance on gas comes with drawbacks alongside the environmental costs.
Gas prices have spiked following the pandemic amid rebounding demand and supply shortage fears, peaking at an all-time high of £8 per therm in March.
This has also driven wholesale prices to a record levels March following Russia’s invasion of Ukraine, which has contributed to market carnage across the UK energy sector.
Nearly 30 suppliers have collapsed since last September, directly affecting over four million customers, with the consumer price cap spiking to nearly £2,000 per year.