Andy Burnham, set to become Prime Minister, will uphold Labour's 2024 election manifesto commitment to ban new North Sea oil and gas exploration licenses. This stance confirms earlier reports, despite speculation that he might ease the ban to boost energy security and the economy. The ban, implemented by Energy Secretary Ed Miliband after Labour came to power, aims to shift the UK away from fossil fuels towards renewable energy.
While new full exploration licenses will remain prohibited, Burnham's administration is expected to allow "tie-backs." These permit production in unlicensed areas linked to existing infrastructure in already licensed blocks. This approach is seen as a pragmatic concession to the oil and gas industry, enabling continued extraction from known fields without breaking the explicit manifesto promise against new licenses for entirely unexplored areas.
Key issues for the new government will include decisions on the controversial Rosebank and Jackdaw fields, which received approval under the previous Conservative government but are now subject to legal challenges from environmental groups like Greenpeace and Uplift. Although these fields already have exploration licenses, their production approvals are currently under review by the Offshore Petroleum Regulator for Environment and Decommissioning (Opred). While Burnham won't explicitly approve these contentious projects immediately, his administration's broader energy strategy will indirectly influence their fate.
The industry's primary concern isn't new exploration licenses, but rather the Energy Profits Levy (EPL), or "windfall tax," which currently stands at a headline rate of 78%. This tax, introduced during the spike in prices following Russia's invasion of Ukraine, is seen by the industry as a deterrent to investment. They prefer the planned 2030 replacement, which activates only during high prices. Burnham's approach to the EPL will be a significant indicator of his commitment to stimulating investment in the sector, possibly facing less environmental opposition than decisions on new drilling.
Despite the ban on new exploration licenses, Burnham's pragmatic approach, particularly regarding tie-backs and potential changes to the EPL, aligns with a mission of reindustrialization and job creation. This nuanced stance seeks to balance environmental commitments with energy security and economic imperatives.
