Labour Party’s Approach to North Sea Oil and Gas Production Clarified During General Election Campaign
As the general election approaches, the Labour Party has made its stance on North Sea oil and gas production abundantly clear. The party has announced its plan to raise existing windfall taxes, first implemented by former Chancellor Rishi Sunak in 2022, from the current 75% to 78%. Ed Miliband, the shadow secretary of state for energy security and net zero, has also proposed the removal of tax reliefs put in place by Mr Sunak, which allowed producers to offset their investments in new production against their tax bills. Mr Miliband has referred to these tax breaks as ‘loopholes’ and argues that this change would bring the tax treatment of the British North Sea in line with that of the Norwegian North Sea.
In addition to these measures, Mr Miliband is also proposing a ban on new oil and gas exploration licenses as part of his ‘green prosperity plan’. With Labour currently leading in the polls, this policy is already having an impact on investment in the North Sea. Three companies – Jersey Oil and Gas, Serica Energy, and Neo Energy – have announced a delay in the planned start of production at the Buchan oilfield, located 120 miles northeast of Aberdeen.
Serica Energy, which has produced an average of 43,781 barrels of oil or oil equivalent per day this year, has taken a stance against Labour’s proposed policies. David Latin, Serica’s chairman and interim chief executive, has expressed concerns about the potential consequences of these actions. In a statement to shareholders, he said, “I have been involved in this industry for more than 30 years, and have worked all over the world. Other than when I was responsible for a company with significant assets in a war zone, I have never encountered a situation as challenging as the current climate in the UK when it comes to making investment decisions and planning for the future.”
Mr Latin also highlighted the fact that the UK consumes almost twice as much oil and gas as it produces and that this deficit will continue even as the country strives to reduce its consumption of hydrocarbons. He added, “These imports worsen our national balance of payments, deliver jobs and taxes to foreign countries, and typically have higher production and transportation carbon emissions by the time they reach our shores.”
Serica Energy is not the only one voicing concerns about Labour’s policies. Unite, the UK’s largest union and traditionally a major financial supporter of the Labour Party, has also expressed reservations about the proposed ban on new oil and gas exploration licenses. The union has published an open letter, signed by nearly 200 local firms from Scottish towns that are heavily dependent on the oil and gas industry, urging a reconsideration of the ban. Some of these businesses joined Unite members in a demonstration outside Aberdeen’s Maritime Museum.
Unite’s general secretary, Sharon Graham, stated, “Until Labour has a concrete plan for replacing North Sea jobs and ensuring energy security, the ban on new oil and gas exploration licenses should not go ahead. Labour must not allow oil and gas workers to become this generation’s coal miners. Scotland’s oil and gas communities are crying out for a secure future, and that is what Labour must deliver.”
However, while businesses and unions are concerned about the potential impact on investment and jobs, some believe that Labour’s policies do not go far enough. As Unite staged a demonstration in Aberdeen, another group, Stop Polluting Politics, staged a protest outside the Labour Party headquarters in Southwark, southeast London. They allege that the party has “financial ties to polluting corporations” and have criticized Shadow Chancellor Rachel Reeves for accepting a £10,000 campaign donation from Labour peer Lord Donoughue, who has previously chaired the Global Warming Policy Foundation, a climate change-skeptical lobby group. Lord Donoughue has denied any influence on Ms Reeves’s decision to ‘water down’ Mr Miliband’s ‘green prosperity plan’ earlier this year.
These events highlight the potential challenges that Labour could face with its energy policies if it wins the election next week. With the North Sea being a vital industry for the UK, any changes to the current tax regime and exploration licenses could have far-reaching consequences.