One year into his premiership, Rishi Sunak has firmly established himself as a net zero sceptic.
This month, he is set to “double down” on anti-green policies in the king’s speech, with policies making it difficult for local authorities to impose schemes such as the ultra-low emission zone, and introducing a new annual system for awarding North Sea oil drilling licenses (27 licenses were in fact issued just this week).
Back in September, regulators approved the symbolically significant 300 million barrel Rosebank oil field, in a move described by Sunak as “the right long-term decision for the UK’s energy security”.
For Sunak, this prospect of “energy security”, as well as the possibility of more North Sea tax receipts, are apparently worth risking the decarbonisation of the economy. Back in the 1980s, when his political hero Nigel Lawson was chancellor, the bounty from new North Sea discoveries meant that 10 per cent of the Treasury’s tax receipts came from oil rents, and allowed the government to cut the top rate of tax.
But experts who have studied the North Sea basin say that the government’s current North Sea plan defies the reality of dwindling crude reserves and soon-to-peak fossil fuel demand.
“The UK’s basin is fundamentally in decline,” said Lisa Fischer, energy systems expert at the think tank E3G. “Propping it up is like pouring money down the sink.” Data from the Energy Institute backs up the declining basin claim, with oil production decreasing from a peak of three million barrels daily in 1999, to 800,000 barrels daily in 2022. Proven oil reserves have also decreased from 8.4 billion barrels in 1980 to 2.5 billion barrels in 2020.
Rosebank is a major new development west of the Shetlands Islands, but it is a minnow compared to historic North Sea oil production – and current UK oil consumption. At its peak, Rosebank is expected to produce 69,000 barrels of oil per day, compared with the 1.3 million barrels of oil consumed daily in 2022.
It is doubtful that the field will be able to shore up energy security in a meaningful way. But what allowing exploration to go ahead at Rosebank does do is give a strong policy signal that the UK is doubling down on oil and gas production, as opposed to directing all efforts towards the energy transition. Experts say this is bad news for offshore workers.
Tessa Khan, executive director of the NGO Uplift, told New Statesman Spotlight .“Oil and gas workers have been demanding a proper, participatory transition plan because they understand, better than anyone, that the North Sea is in decline.
“The government’s plan to get every last profitable barrel out of the ground is at odds with the reality that we now need to actively plan for the transition.
“It is beyond time that the governments in both Westminster and Holyrood got serious about the inevitable decline in the UK’s oil and gas industry, not least because the opportunities for jobs in alternative, sustainable industries are immense.”
For the 28,000 workers directly employed in North Sea oil and gas, a bold new industrial strategy that ushers in a managed transition to new sectors, rather than one that defers the inevitable decline of a legacy industry, would be better. Analysis from the consultants EY, commissioned by the Scottish government this year, found that even in a scenario where oil prices remain high – and where therefore more expensive new projects are likely to be commissioned – employment in the oil and gas sector would decline.
Industry insiders have long argued that many of the skills required in industries such as offshore wind are easily transferrable from the oil sector, but this will require stronger regulatory and licensing support if worker movement is to happen at scale.
Under previous prime ministers, the government had shown some inclination towards transitioning the skills of workers. But the 2021 North Sea transition deal to “transform the sector in preparation for a net zero future” has been roundly criticised for only containing loose commitments for job creation. Analysis shown exclusively to New Statesman Spotlight by Uplift shows that the deal would create fewer jobs than there are currently in the North Sea.
Earlier this year, a group of climate NGOs, unions including Unite and Unison, and more than 1,000 offshore workers, backed a plan that called for an orderly transition away from fossil fuel extraction in the North Sea. It had ten key demands, including, “clear, accessible pathways out of high carbon jobs”; investment in domestic renewables manufacturing; and new workers’ rights and wage floors for all offshore workers.
“We want a proper industrial strategy in place that is capable of delivering a just transition,” a spokesperson for another union, GMB, told Spotlight. “We need more strategic action and commercial incentive to build the supply chains that might deliver some of the many thousands of green jobs that have been promised for more than a decade.”
While politicians may still be attracted to big oil projects, surveys suggest North Sea workers are not so beholden to the real-terms pay cuts and worsening working conditions that have been associated with working on rigs in recent years. More than 80 per cent of UK oil workers said they were open to leaving the industry in the aftermath of the pandemic.
“I was made redundant in June 2020 [with the impact of Covid on global oil prices],” said Stuart, 55, an offshore worker for the past 35 years, in a testimony recorded at a recent offshore worker workshop carried out by NGOs Platform and Friends of the Earth Scotland, which has been shared with Spotlight. “I know a lot of people who also suffered in 2014 [when oil prices plunged again]. But as long as they are making money through boom and bust, companies don’t care about workers thrown on the dole every five or six years.”
Oliver, 42, added: “It’s noticeable in Aberdeen when there’s an oil price crash: everything’s a lot quieter, everyone is worried about their jobs, there’s not as much money about.” He has been an offshore worker for 12 years. “I don’t think anyone really likes it, a lot of people who work in industry have been fed up with it for years.”
If the government continues to avoid planning for an effective transition in the North Sea, then the sector could face sudden collapse; something that would be bad news for workers like Stuart and Oliver, as well as for investors.
“Not only will investing in new oil production likely do little to impact the price that consumers pay at the moment,” said Mike Coffin, oil and gas lead at the think tank Carbon Tracker, “but expected revenues will also not materialise if long-term commodity prices fall in response to falling demand.”
The pace of net zero planning means that analysts are already anticipating peak oil and gas demand by the end of the decade. Fossil fuel demand is then expected to rapidly decline: the very future that Coffin warns about. The government’s plan to “max out” UK oil and gas seems out of sync with reality.