North Sea Energy

Statement

The following Statement was made in the House of Commons on Thursday 6 March.

“With permission, I would like to make a Statement about this Government’s plans to unleash the North Sea’s clean energy future.

For almost half a century, the workers, businesses and communities of the North Sea have powered our country and the world. We believe that they can and will continue to do so for the next half a century and beyond, which is why yesterday, we launched a consultation on the steps we are taking to seize the opportunities of the clean energy transition in the North Sea. This is about working with businesses, workers and communities to strengthen north-east Scotland’s status as the energy capital of the UK, and it is about showing global leadership as we deliver a well-managed, orderly and prosperous transition.

We know that the North Sea is a maturing basin. Oil and gas production has seen a natural decline of 72% between 1999 and 2023, and as a result, the industry has lost around a third of its direct workforce over the past decade. The truth is that sprinting to clean energy is the only way to deliver energy security and good, long-term jobs for the workforce and for communities. At the same time, we know that we need to listen to the science on what is required to keep global warming to 1.5 degrees. A science-aligned approach to future oil and gas production is the only way to deliver climate security for future generations, so we owe it to the North Sea’s workers and communities—who have done so much for our country—to come up with a proper plan for the future. That is what this Government are doing.

First, we are consulting on our manifesto commitment not to issue new licences to explore new fields. While we have always been clear that oil and gas will continue to play an important role for decades to come, the reality is that new licences for oil and gas awarded in the past decade have made only a marginal difference to overall production. To continue granting them would not help our energy security, would not be compatible with our climate commitments, and would not take one penny off bills. As such, we will not award new licences, but we will continue working with the sector to manage existing fields for the entirety of their lifespan. We will also provide the long-term certainty on its fiscal landscape that the sector needs. Yesterday, the Treasury set out plans for a new regime to respond to future spikes in oil and gas prices once the energy profits levy ends in 2030.

The second part of the consultation is about harnessing the North Sea’s unique strengths, including its offshore infrastructure, highly skilled engineers and deep supply chains, to make it a global clean energy powerhouse. In just eight months, we have already made significant progress. We have established Great British Energy in Aberdeen, so that it is in the perfect position to drive the rollout of clean energy projects. We have improved the offshore wind auction, so that later this year there will for the first time be a new clean industry bonus to reward investment in good manufacturing jobs and clean supply chains. We have overseen a record-breaking renewables auction. We have kick-started the UK’s carbon capture and hydrogen industries—the energy sectors of the future—with strong, early investments. Just yesterday, we awarded more than £55 million to the port of Cromarty Firth for upgrades that will support the development of floating offshore wind, creating hundreds of jobs as we ensure that Scotland and the UK remain world leaders in this next-generation technology. But that is just the start.

Our clean power action plan will drive £40 billion a year of investment to meet our goal of clean power by 2030. Research shows that jobs in offshore renewable sectors could increase by tens of thousands in that time. We will also make sure that workers have the tools they need to take up these new opportunities. Already, we have worked with the Scottish Government and trade bodies to launch a skills passport, making it easier and quicker for oil and gas workers to bring their skills and experience into clean energy jobs. That idea has been stuck in the mud for years. Thankfully, we have made more progress in the past eight months than was made in the previous 14 years combined. At the same time, we are putting clean energy at the heart of our upcoming modern industrial strategy.

We are incredibly fortunate to have the North Sea on our doorstep. For decades, the oil and gas buried there have fuelled development and charged our economy, but the North Sea’s long-term future lies in its incredible clean energy potential. We know that its stable winds and shallow shelves make it one of the best locations in the world for offshore wind farms. We know that the UK continental shelf alone has enough capacity to store up to 78 billion tonnes of carbon, which is roughly the amount this country has produced since the Industrial Revolution. With our skilled offshore industry and workforce, we are perfectly placed to seize this natural advantage and get ahead in the global race for new jobs in new industries.

Instead of sticking our head in the sand and avoiding the big decisions, we have set out a plan to deliver the future that the North Sea’s workers and communities deserve. It is a plan to co-ordinate the scale-up of clean energy industries, from offshore wind and hydrogen to carbon capture and storage; a plan to give the oil and gas sector the support and clarity it needs to continue operating for decades to come; a plan for energy security and sustainable economic growth; and a plan to keep working with the people who matter most—the North Sea’s businesses, workers, communities and trade unions—to take advantage of the tremendous opportunities of the years ahead together. I commend this Statement to the House”.

19:26:00

My Lords, this Government have done the exact opposite of building the North Sea’s energy future. Instead, their attitude to our North Sea oil and gas industry, and the hundreds of thousands of people it employs, borders on contempt. For clarification, we should remind ourselves that the 2050 net-zero target, set in Glasgow at COP 26, still required 25% of our energy to come from hydrocarbons. In the North Sea, we have the cleanest and most environmentally advanced industry and the toughest regulatory regime in the world. This world-class industry is now under existential threat from this Government. We should be clear that the energy profits levy is now at its highest level, as a result of the decisions made by this Government. This hike is uneconomic and will see the evaporation of investment in the sector. As my counterpart in the other place said last week, it may well be “Drill, baby, drill” in the US, but it is “‘Dole, baby, dole’ under Labour in the United Kingdom”.—[Official Report, Commons, 6/3/25; col. 460.] Let us look at where we are now. The investment allowance has almost been dismantled, and a windfall tax will now be in place for much longer, until 2030—directly because of the choices made by Ed Miliband. A leading US investor said to me recently that “we now consider west Africa to be a more stable investment environment for hydrocarbons than the UK”. During a period of global instability, it beggars belief that our Government are shutting down our domestic oil and gas industry at a pace that jeopardises both our energy supply and our energy security. We are already seeing the impact of the Government’s punitive tax measures: investment is vanishing, work is slowing up or being stopped entirely, and companies are leaving the UK for countries that do see a future in the oil and gas industry. But, even more worryingly, we are haemorrhaging the backbone of our highly skilled technical staff overseas. The Government’s race for 100% clean electricity by 2030 is driven solely by ideology. They have placed politics above the North Sea’s industry, workers and community, which will all be devastated by their decisions. Despite the fact that they claim that economic growth is their number one mission, their decisions will lead to a £12 billion loss in tax revenue, in addition to another £12 billion in lost capital investment. Instead of making Aberdeen great again by ramping up production, the Government’s approach is to use GB Energy to dabble in renewable projects that the private sector has already decided are dud—a Potemkin village strategy if ever there was one. All this damage will only see the UK increase its dependence on expensive imports, which will also offshore emissions abroad. The Government’s approach to our energy future simply does not make sense, particularly as the UK accounts for less than 1% of global emissions. Let us not be mistaken: this is simply a case of virtue signalling, and the British people will pay the price. Will the Minister confirm that the Secretary of State has consulted those employed in the oil and gas sector and understands how his policies will impact them directly? Will she explain exactly how much will be needed to support the 200,000 workers in the oil and gas industry, given the recent £200 million of Treasury support for the 2,000 workers impacted by the closure of Grangemouth? Finally, will she inform the House whether DESNZ and HM Treasury have factored these calculations into the spending review later this month? There is no one else to blame and nowhere else for this Government to hide. I look forward to a comprehensive reply from the Minister.

My Lords, we welcome this important step towards developing a framework for future energy in the North Sea and, in particular, the clear intention to engage in a constructive dialogue with North Sea communities, business supply chains, trade unions, workers and environmental groups. We also welcome the clear recognition that the North Sea will remain at the heart of Britain’s energy future, supplying home-generated, clean, renewable energy, supporting jobs and our future energy security long into the future. We urgently need a coherent transition plan for the North Sea to support workers, supply chains, families and communities. We need much more thinking and planning on how we transition away from oil and gas after 50 years of drilling in what is now a rapidly declining basin and how we can all work to ensure a just transition for our oil and gas industry workers. While we welcome the consultation and the Government’s vision for an internationally leading offshore clean energy industry, we believe that more decisive and accelerated action is required to ensure a truly speedy and just transition for the workers and communities who have powered this country for decades. The consultation period is very short. The closing date is 30 April. Is this really enough time, considering the complexity of the task at hand and the range of consultees? What reassessment of the urgency and support needed for a just transition are the Government making, considering the impact of the Supreme Court decision on new oil and gas fields? The implications of the Supreme Court judgment must mean that these matters are now more pressing and require a rethink and more resources than they did. We are seeing multilateral energy companies such as BP rowing back from their commitments to the energy transition. What impact is this having on planning to transition and what actions are the Government taking to work constructively with these companies? At its heart, this is about rapidly teaching the skills and creating the job opportunities for the future during a period of exceptional social change. While the consultation outlines improvements in clean energy industries, more concrete commitments and funding mechanisms are needed to ensure a truly just transition for the existing oil and gas workforce. Although research suggests high skills transferability, bridging the gap between potential and actual job creation in the clean energy sector requires significant government intervention. We call for more proactive and adequate funding for retraining and upskilling programmes. There has been talk of GB Energy cuts. We believe that these are counterproductive. The green economy grew by 10.3% last year and, since the war in Ukraine started, we have spent £40 billion importing foreign energy. Cutting GB Energy will simply lead to higher energy bills and more money for the Russian war economy. Policy certainty is of paramount importance and I call on the Government to maintain clear lines to ensure the investment we need to transition. The Government must provide a clear and unwavering long-term vision and must do more than just simply phasing out oil and gas. This will clearly need business plans and investment to ensure that we can transition. Will the Minister say what comes next after the consultation has closed? How will the results be published? What role will Parliament have in making future recommendations?

My Lords, I thank both noble Lords for their contributions to this crucial debate. I thank the noble Earl, Lord Russell, for his positive comments at the beginning of his contribution. I look back fondly on the time we worked together, when I was the Opposition Whip for this area, and we did some useful work together. To go to the nub of the Statement, which came out in the Commons last week, the Secretary of State launched a consultation on the steps this Government have taken to seize the opportunities of the clean energy transition in the North Sea. That was the critical point that we are talking about tonight. It is about working with businesses, workers and communities to strengthen north-east Scotland’s status as the energy capital of the UK and, obviously, reaching beyond. It is important that all of us talk up the opportunities that we have got going forward. At the same time, we obviously have the backdrop of global warming to 1.5 degrees and all the evidence we have around that, but I reassure the noble Lord, Lord Offord, that making Britain a clean energy superpower is one of the five missions of this Government, as he quite rightly stated. We are committed to delivering clean power by 2030 and accelerating to net zero across the economy. As part of this mission, the Government remain committed to achieving the UK’s NDCs, carbon budget 6 and net zero by 2050. We all know, and need to acknowledge, that the North Sea is a maturing basin. Oil and gas production has seen a natural decline of 72% between 1999 and 2023, and, as a result, the industry has already lost a third of its direct workforce over the last decade. We cannot ignore the situation that we are in and, as the noble Earl, Lord Russell, identified, we need a new plan to move forward. We cannot continue to exist as we are; this plan is urgent, as expressed last week in the Statement. It is a government manifesto commitment not to issue new licences to explore new fields, and we have always been clear that oil and gas will continue to play an important role for decades to come. The reality is that new licences for oil and gas awarded in the last decade have made only a marginal difference to overall production. To continue granting them would not help our energy security and not be compatible with our climate commitments. Furthermore, as domestically produced oil and gas are traded on international markets, it will not mean cheaper prices for consumers. We have to continue to work with the sector to make sure that the existing fields are managed appropriately for the entirety of their lifespan, and, in answer to the noble Lord’s questions, I want to give real assurance that that is very much part of the Government’s plans. We will respond to the consultation in due course. I cannot give a specific timeframe at this point, other than that we recognise that this is urgent, as I have already said. Developers will, of course, be able to apply for consents under this revised regime. The other part of the Statement very much referred to the North Sea’s unique strengths, and I would hope that all of us can come together to be much more positive about the potential we have going forward. We know that low-carbon technologies such as CCUS—carbon capture—and hydrogen will play a key role in supporting decarbonisation across the economy, including hard-to-abate sectors. It is estimated that the offshore renewables workforce, including in offshore wind, hydrogen and other technologies, could increase to between 70,000 and 138,000 by 2030. I hope this addresses some of the concerns that obviously have been expressed. It is vital for delivering the best outcomes for workers, communities, energy security and sustainable economic growth. This also shows how quick and decisive action is needed with the cessation of fossil industries, as we saw at Grangemouth. We acknowledge that we have supported Grangemouth with £200 million from the National Wealth Fund for co-investment with the private sector to unlock Grangemouth’s full potential and secure our clean energy future. The fact that the Government have moved so quickly to establish Great British Energy is a real indication of our commitment to our clean power target, overseeing a record-breaking renewables auction and improving the offshore wind auction. We all know how disastrous the previous auction was, with no responses at all. We obviously need to kick-start the UK’s carbon capture and hydrogen industries with strong early investment. The other factor that we need to acknowledge—and I do not think has been picked up—is just how important it is to accelerate the build of new network infrastructure which is essential for reducing curtailment and constraint payments. But this is just the start. The independent NESO has also set up pathways to a clean power system in 2030 and confirmed that a clean power system was deliverable, more secure and could see a lower cost of electricity and lower bills. Building on this advice, our clean power action plan will drive £40 billion-worth a year of investment to meet our goal of clean power by 2030. I would just like to restate how fortunate we are to have the North Sea as part of the United Kingdom. In response to the noble Lord, Lord Offord, I can say that the North Sea workers will be central to the discussions that we take forward—and not just the workers but the communities, the supply chains and all the rest of the support that our development and plans require. The plan is the scale-up of clean energy industries and giving the oil and gas sector the support and clarity it needs to continue operating for decades to come. The plan is to keep working with the people who matter the most, as I have said—the North Sea’s businesses, workers, communities and the trade unions—to take advantage of the tremendous opportunities of the years ahead. I have to say that our experience is not the negative picture from the private sector as has been described. We are in very productive conversations with different sectors, with industry, to move forward. We recognise just how important the work is to support the workers. We absolutely understand the step-change that needs to happen around the skills agenda—this is fundamental —but the potential and the opportunity must drive everything we do going forward. I am sure that noble Lords will understand that I cannot comment on the spending review in any detail at this point. The outcome of the review will be made public very soon. We look forward to seeing a positive step forward to make sure that the North Sea gets the investment and particularly enables the energy sector up there to contribute to the security of this country. We know that the status quo is not acceptable. We were incredibly exposed after Russia invaded Ukraine; we need to make sure that we move forward at pace, with confidence and with the support of the country behind us.

19:45:00

My Lords, while this Statement is about energy, all these various forms of energy in the North Sea will have to co-exist with other uses such as shipping and fisheries, with the towns and cities which abut the North Sea, and with the environment, which in general is pretty fragile and, in cases such as Dogger, pretty much in crisis. Can the Minister say how the Government intend to co-ordinate to make sure that moving forward on energy in this regard will not compromise some of these other activities? Almost a decade ago, I chaired a Select Committee of this House that called for a strategic North Sea plan that would seek to balance these things. As far as I know, it has never been developed, so I wonder whether the Minister can say how this co-ordination will take place.

I sincerely thank the noble Baroness for raising these important points. Let me acknowledge the awful tragedy that has just happened in the North Sea. I come from Yorkshire, and I know how congested the waters are there. Our thoughts are with the families of those involved. There will clearly be an inquiry into what happened there, but it serves as a very useful backdrop to the issues that the noble Baroness raises. However, with another hat on, I was very pleased to be involved in the debates on the Crown Estate and ownership of the coastal areas and the various responsibilities in those areas—not only people looking after their own employment, but the environment. Those considerations are important, and I am confident that, by putting together these packages with key interested partners, we will be able to come up with a very positive plan that highlights the issues that the noble Baroness raises.

My Lords, I welcome the opportunity to debate these issues, and I echo what the noble Baroness and others have said about the tragedy in the North Sea. I cross the North Sea every year to visit my family in Denmark. When I was an MEP, we crossed the North Sea in a ferry after the “Estonia” tragedy to show solidarity. On the issue before us this evening, does the Minister share my concern that we should have a more balanced source of energy rather than what could appear to be a rapid dash for clean energy? We have seen, as the noble Earl said earlier, that BP as a single company is moving away from renewables back to its more traditional oil and other energy uses. There are also environmental issues related to clean energy, such as decommissioning wind turbines and siting substations to bring renewable energy onshore, and the fact that our competitors—the USA, Norway and other countries—are still relying on their oil and gas reserves. Should we not be looking for a more balanced view? I also echo what the noble Baroness said earlier. We had many debates during the passage of the clean energy Bill about the environmental issues. I particularly share her concern about fishermen and spatial squeeze—10% of fisheries grounds could be lost through clean energy. If the Minister could address these issues, I would be most grateful.

I thank the noble Baroness for raising these issues. It is a complex picture, but this Government are absolutely determined to get to grips with it. On alternative sources of energy, I have mentioned hydrogen, and we have had some very robust debates about its potential future use. The Government have also taken swift action to unlock the potential of onshore wind. The issue that we probably need to discuss more than we do is how we reduce the consumption of energy at all, whether in our businesses or a domestic setting, and where the highest use of energy is. The noble Earl has raised the issue of BP before. It is difficult for us to stand here and talk about commercial decisions made by companies, of whatever scale; it would not be appropriate to do so. But I emphasise that although the foot is on the accelerator in progressing to clean energy, we recognise, as we have repeatedly said, the contribution that oilfields and gas will continue to make as we make that transition. We have to make sure that the country is not exposed to any shocks, and that we do this in a measured and sensible way to ensure that we get to where we want to be. There are, of course, competing challenges—I have heard the noble Baroness discuss on many occasions the impact of climate change on communities in rural areas in Yorkshire, for example, where we live—but there are many opportunities. We need to look at examples around the world, while focusing on making sure that Britain is the best and that we do all we can to reinvigorate our energy markets, provide the jobs we need and create an environment where we invest both within the country and on the international stage.

Does the Minister agree that the broad direction of this strategy is heavily supported by the public, the energy industry and the trade unions, which increasingly believe that future growth will be green growth, and future jobs will be low-carbon jobs? Does she agree that the Opposition, in continuing to face in absolutely the opposite direction —I know what opposition means—look increasingly blinkered and, frankly, out of touch on this issue?

I thank my noble friend for those comments; that was the point I was trying to make. I believe very strongly that positives attract. By going out and talking to people and explaining the progress we wish to make and how we move forward, we are gaining traction. There is an element of the clean energy debate that we do not often consider and should pay more attention to: the impact on the health of both people working in the industry, and communities that have been exposed to, for example, air quality conditions that we should be looking at. We should be looking after our children’s health and looking after their futures. There is a positive response. When I go out and talk to businesses, they see the opportunity in a positive way, recognising the challenges, but also that this Government are committed and will work across all the sectors to achieve the aims and objectives ahead of us.

My Lords, I support the comments made by my noble friend Lord Offord. The title of this Statement on Today’s Lists— “Building the North Sea’s Energy Future”—is an oxymoron; the proposals coming forward from the Energy Secretary are doing quite the opposite. An industrialised nation such as ours cannot be dependent on so much alternative and renewable energy. We will, for the foreseeable future, need to rely on hydrocarbons. One of my concerns is about energy security and self-sufficiency; I do not think that that has been taken into account at all. We have turbulence across the Middle East and wars going on, obviously with Russia involved, and yet the reliance of the UK and Europe on these ways of bringing energy into our country does not seem to have been taken account of at all. Frankly, what is going on is vandalism. Some 2,000 jobs are at risk, without which probably at least 10,000 people will be without the supply chain, but that is a number that is just thrown up in the air. That will be the hard effect, certainly if we were to look around Aberdeen and such areas. That notwithstanding, and although it did not concern the North Sea specifically, I attended a very interesting meeting today with Cuadrilla—the company that sunk the wells for shale gas. Over the years we have had to look at alternative ways of fuelling this nation, and have had good discussions, but now, not only is fracking the big bad wolf but the vandalism that is taking place—pouring concrete down perfectly serviceable wells, which may in the future be very useful to us, notwithstanding the geopolitical position and energy uncertainty across the world—is absolutely astonishing. I note the Minister’s comments, but I am not sure who the Energy Secretary, Ed Miliband, is trying to convince. A lot of this is built on ideology and is not helpful to the British economy. We are already seeing businesses suffering with the policies from this Labour Government—for example, the closure of the Vauxhall factory in Luton—and this is just the start. I ask the Minister to discuss further with our Energy Secretary positive ways of moving forward. The net-zero obsession is going to destroy this economy quicker than most other things. We need a reality check on this if we want this country to grow. According to the Prime Minister, growth is apparently key to the Government’s agenda, but what they are actually proposing will not produce growth.

I hope that the noble Baroness is not trying to put all the problems created by the last 14 years of the Conservative Government at the door of Ed Miliband. We know that the economy has problems, as a result of disastrous decisions made by recent Ministers of the party opposite. To re-emphasise what I was saying, the impression that the situation is rosy and needs to be continued with is entirely false. I repeat what I said in my opening comments: oil and gas production has seen a natural decline of 72% between 1999 and 2023, and, as a result, the industry has lost around a third of the direct workforce. The problems are there. We are taking the opportunity to do the right thing by moving towards net zero, and doing so in a way that brings hope, jobs and the prospect of future prosperity to an area that, frankly, has been struggling for some time. In my experience, public opinion on fracking is at an all-time low. The noble Baroness should reflect on the comments that she made. The Secretary of State has laid out a positive agenda, one that is supported with clear milestones, and a total commitment to moving forward to make this work for the economy of the whole of the United Kingdom.

My Lords, I join my noble friend on the Front Bench in broadly welcoming the Statement. The Beatrice wind farm, which has been extremely successful, has its operating headquarters and all its service boats in the port of Wick. It has been a tremendous economic boon for the east coast of Caithness. I expect that further developments, such as the west of Orkney wind farm—which is in the Atlantic, not the North Sea, but is broadly the same proposition—and the other wind farm in the North Sea will have a similarly beneficial economic impact. I firmly believe that the economic future of the UK is a very bright one, using high technology and renewable energy. Declaring my interest as chair of the Caithness District Salmon Fishery Board, I echo my noble friend’s concern regarding the balance with the environment. There is a conflict in some instances between development and the marine environment. I am aware that we are not going to stop anything, nor would be want to, but we want to ensure that the proper processes are gone through, so that we know what we are doing and therefore can take proper mitigating action. I am aware that the Minister cannot give me an answer, because it is entirely down to MD-LOT and the consenting unit in Scotland, but I thought that I would try to get it on the record anyway.

I thank the noble Viscount for his positive comments. I urge everyone to celebrate those successes and to talk more loudly about them, to generate enthusiasm and excitement—as I said, positives attract. Behind all of that, our commitment to re-skilling, working with young people and giving a vision for the future is critical. I thank the noble Viscount for giving me a get-out on the marine environment, but there is so much more that we need to do around mapping the coastal areas and understanding what we have and what is vulnerable, and who has responsibility, and then coming together and making sure that it is positive for everyone. There are challenges and there will have to be trade-offs—we know that—but, ultimately, this is a very positive agenda that will bring benefit to our communities across the United Kingdom.

20:02:00

Sitting suspended.