As Andy Burnham stands on the brink of becoming the UK’s new Prime Minister, the North Sea oil and gas industry is making a final push to influence his reindustrialisation agenda. Industry advocates have reached out to over 400 Labour MPs, urging them to permit increased drilling in UK waters to bolster domestic energy production and reaffirm the nation’s industrial capabilities.
Industry’s Call for Action
In a letter spearheaded by Offshore Energies UK (OEUK), more than ten business organisations affiliated with the oil and gas sector, alongside the GMB trade union, have expressed their support for the government’s vision of a secure, lower-carbon energy future. However, they assert that this transition will be more effective if it builds upon the country’s existing industrial strengths rather than disregarding them.
The letter highlights the critical need for oil and gas resources in the UK for years to come. “The question is not whether we use these resources, but whether we produce as much of them as possible ourselves or become increasingly dependent on imports from overseas,” it states.
The Reindustrialisation Agenda
Burnham’s impending leadership promises a concerted effort to address the deindustrialisation that has plagued the UK economy in recent decades. He has committed to enhancing political devolution and fostering “good growth in every postcode.” This includes safeguarding manufacturing and production capabilities in essential sectors such as energy.
Yet, the fate of key North Sea projects, namely Rosebank and Jackdaw, hangs in the balance. Under the previous government, both projects received exploration licences, and the current administration could grant final approval without contradicting Labour’s manifesto pledge to halt new exploration licences.
A Complicated Energy Landscape
The Jackdaw gas project, which could begin supplying gas to British homes this winter, is reportedly gaining traction for approval, potentially positioning Burnham’s energy secretary, Ed Miliband, as a credible candidate for the chancellorship. Conversely, the Rosebank oil project, which would primarily supply oil for export, faces a longer timeline for production initiation.
Steve Elliott, chief executive of the Chemical Industries Association, advocates for a dual approach, stating, “Backing North Sea oil and gas alongside renewables is not about slowing progress. It is about strengthening industrial competitiveness, protecting jobs, and reducing reliance on imports in an increasingly volatile world.”
In contrast, critics like Robert Palmer, deputy director of Uplift, argue that new drilling will not significantly enhance energy security. He emphasises the need for a swift transition to renewable energy sources to mitigate reliance on fossil fuels. “The government should ignore the special pleading of companies that have profited amid rising energy costs for households,” he argues.
The Pressure on Electricity Costs
As Burnham prepares to assume office, he faces the pressing challenge of reducing electricity generation costs. A report from the CBI and Energy UK indicates that electricity prices in Great Britain are around 45% higher than the G7 median, stifling productivity and competitiveness across the economy.
Louise Hellem, chief economist at the CBI, insists that lowering energy costs must be a priority for the new Prime Minister. “Years of policy costs loaded onto electricity bills have left UK businesses facing some of the highest electricity costs among the world’s major economies,” she warns.
Why it Matters
The outcome of this lobbying effort and Burnham’s subsequent decisions could reshape the UK’s energy landscape and its economic future. Balancing the immediate demands of the oil and gas sector with long-term sustainability goals will be crucial. The choices made will not only impact energy security and economic growth but will also define the UK’s commitment to a greener future. As the nation grapples with the dual challenges of energy independence and climate change, the direction taken by the new government will reverberate across households and industries alike.
