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UK government consultation on not offering new licenses

Tuesday, September 24, 2024

The UK government has begun a consultation on its policy of not offering new exploration licenses.

Chris Johnson, Vice President, Oilfield Services & Equipment (OFSE) Europe, North Sea & Caspian at Baker Hughes said it was something he was very pleased to see, speaking at the annual conference of UK offshore energy trade body OEUK in Aberdeen on September 17, 2024.

This policy, along with increasing taxation of oil and gas operations, is leading to a 'cascading effect', such as where declines in investment by operators lead to declines in investment by suppliers, he said. Baker Hughes is already seeing this, he said.

Baker Hughes employs around 4750 people in the UK in various sites. It has 3,000 UK suppliers, and spends £300m annually in the UK supply chain. It also exports £400m annually from the UK.

Explaining further, David Whitehouse, chief executive of OEUK, said that the UK Labour government is seeking ways to meet the letter of its manifesto commitments, which are both not to issue new licenses and also to protect jobs.

Specifically, the manifesto states, 'We will not issue new licences to explore new fields,' and 'the North Sea will be managed in a way that does not jeopardise jobs.'

If we reach the point where government policy is stopping investment, including by suppliers, then jobs are probably being jeopardised.

'Around 2 weeks ago, government (announced) they will do a consultation, something industry had asked for,' Mr Whitehouse said. 'That process will be completed by spring of next year. I think it will be a consultation on how to deliver on government's manifesto commitments.'

A possible area of 'wiggle room' is that companies will be allowed to develop fields which have already been discovered, and can be tied back to existing infrastructure. In this case, the exploration license already exists.

'Industry has had a lot of engagement with the energy ministry and Treasury,' he said. 'Engagement is good.'

The government's goal is clear, 'it does not want a cliff edge,' he said. '[UK prime minister] Keir Starmer does not want polices which jeopardise jobs. We build on strengths, we don't jeopardise them. We do it in a pragmatic way. We make the best of what you have.'

OEUK conducts public opinion polls to see what the UK public think about the oil and gas industry, and a majority of respondents say they would like to see the sector decarbonising, he said. This can include investing in CO2 storage, hydrogen production and wind. “There is a high level of public acceptance.”

Oil and gas companies continue to make improvements and development plans with emissions. “We see [offshore] electrification as an important part of the long term plan,” Mr Whitehouse said.

External Links
» OE UK conference

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