The government has confirmed it will maintain the ban on new drilling licences for the North Sea as it looks to shift production over to other offshore industries such as hydrogen, carbon capture and wind power.
The Department for Energy Security and Net Zero (DESNZ) said it would end the “windfall” tax on oil firms in 2030, but was looking at other regimes that could be activated in the event of future shocks in oil and gas prices. The windfall tax was first introduced in 2022 to help support households struggling with spiking energy prices in the wake of Russia’s invasion of Ukraine.
Last month, climate researchersurged Prime Minister Keir Starmer not to approve a major new oil field in the North Sea, which the Treasury was rumoured to be considering as part of its efforts to boost economic growth.
The North Sea oil basin is currently in decline, and production in 2023 was the lowest since the 1970s. With Britain looking to eliminate its carbon emissions by 2050, hundreds of wells will need to be decommissioned every year as more oil and gas fields shut down.
But in a consultation setting out the overarching objectives for the North Sea, DESNZ said it wanted to give the industry certainty about the lifespan of oil and gas projects already underway, and committed to maintain existing fields for their lifetime while working with business on a managed transition to cleaner technologies.
“The North Sea will be at the heart of Britain’s energy future,” said energy secretary Ed Miliband. “For decades, its workers, businesses and communities have helped power our country and our world.
“Oil and gas production will continue to play an important role and, as the world embraces the drive to clean energy, the North Sea can power our Plan for Change and clean energy future in the decades ahead.”
Researchers at Heriot-Watt University recently suggested that former gas terminalscould be repurposed as geothermal energy facilities, which would allow them to shift to clean energy production.
It is estimated that the offshore renewables workforce – including offshore wind, carbon capture and hydrogen – could increase to between 70,000 and 138,000 by 2030. Meanwhile, an up-and-running carbon capture industry alone is expected to add around £5bn per year of gross value to the UK economy by 2050, DESNZ said.
David Whitehouse, chief executive of trade association Offshore Energies UK, said: “Today’s consultations, on both the critical role of the North Sea in the energy transition and how the taxation regime will respond to unusually high oil and gas prices, will help to begin to give certainty to investors and create a stable investment environment for years to come.”
A recent report found that new gas export terminals globallyhave received $213bn (£167bn) of funding in recent years, putting efforts to stymie the pace of climate change at risk.