Keep knowledgeable with free updates
Merely signal as much as the UK power myFT Digest — delivered on to your inbox.
The UK authorities is pushing forward with plans to halt new oil and fuel exploration licences however left room for a “pragmatic” method to manufacturing in a transfer welcomed by the trade.
In a session set out on Wednesday confirming an election manifesto pledge, the government stated it might difficulty “no new licences to discover new oil and gasfields”, a coverage criticised by the GMB union as “insanity”.
Ministers stated present plans for world oil and gas manufacturing had been “not appropriate” with the drive to restrict world warming to beneath 1.5 levels, they usually had been making an attempt to develop cleaner power industries as an alternative.
Nonetheless, the session additionally left room for the federal government to take a versatile method to “tiebacks”, during which new fields may be drilled by way of adjoining current fields. This measure was welcomed by the oil and fuel trade, which has warned curbing licences dangers rising the UK’s reliance on imports.
In keeping with the session paperwork, ministers are in search of to search out out “how we would be sure that our regulatory regime can assist exercise the place it’s wanted to ship the federal government’s broader strategic priorities”.
One trade supply stated: “A commonsense method in the direction of sources which are accessible is to be welcomed.”
Martin Copeland, chief monetary officer at North Sea producer Serica Vitality, stated: “We’re happy to see that the federal government has appreciated that their marketing campaign message was easy, however the actuality is extra advanced and the trade will likely be happy to provide its enter of how this may be translated into a practical and workable new regime for the way forward for the North Sea.”
Figures near the method stated the session had been delayed by a number of weeks due to jitters in Downing Avenue about how the ban on new exploration licences could be seen within the White Home, after President Donald Trump stated he wished American oil firms to “drill, child, drill”.
The federal government revealed the licensing session alongside a plan for a brand new tax regime from 2030 when the present windfall tax levy, launched in 2022 as costs surged following Russia’s full-scale invasion of Ukraine, is because of expire.
Underneath the plans, the sector would return to paying solely the everlasting taxes — at the moment amounting to a charge of about 40 per cent — however they’d robotically pay extra if wholesale costs rose to uncommon ranges.
The purpose is to provide the trade extra certainty about what occurs throughout value shocks. Firms complained that introducing one-off windfall taxes undermined investor confidence.
“The federal government acknowledges that adjustments to the oil and fuel fiscal regime in recent times have led to a interval of uncertainty for the sector and its buyers,” the Treasury stated in session papers.
The way forward for the North Sea is a significant problem for the Labour authorities and power secretary Ed Miliband. The sector helps greater than 200,000 UK jobs, in line with commerce group Offshore Energies UK.
Regardless of efforts to maneuver to lower-carbon applied sciences, oil and fuel accounted for 75 per cent of the UK’s complete power demand in 2023, with petrol vehicles, gas-fired boilers and gas-fired energy stations nonetheless enjoying an enormous function.
However even with out the transition to renewable power, the North Sea is in decline, with oil majors in search of alternatives elsewhere on this planet. UK oil manufacturing hit a report low of 34mn tonnes in 2023, a few quarter of its peak in 1999.
The federal government’s plans have been criticised by GMB union — one of many Labour occasion’s most beneficiant donors. “For so long as we want oil and fuel, banning new licences by no means made any sense. Within the new geopolitical actuality it’s insanity,” stated GMB normal secretary Gary Smith, one in every of Britain’s strongest commerce union chiefs, forward of the session.
David Whitehouse, chief government of Offshore Energies UK, stated: “We nonetheless have oil and fuel reserves in our offshore waters and we should always use them responsibly alongside renewable power. We should get this proper and this implies significant engagement.”
