North Sea operators have eight weeks to secure a stable future after the UK Government launched two quick-fire consultations on tax and future exploration.
Ed Miliband has moved to deliver Labour's manifesto pledge to ban new licences, while the Treasury has launched a paper on a long-term successor regime to the windfall tax, which it confirmed will end in 2030.
Consultation papers on both policies were launched yesterday, just as the oil price slumped to a three-year low, leading to warnings that the industry cannot sustain a tax rate of 78% until 2030 without huge job losses.
The government says it is committed to working with industry, communities, trade unions and wider organisations to develop a plan that will ensure a phased transition for the North Sea – creating tens of thousands more jobs in offshore renewables estimated by 2030.
Ministers also sought to emphasise that it wants to encourage investment into domestic oil and gas production to ensure North Sea production continues for decades. However, their policies remain at odds with the conditions industry says it needs to thrive.
OEUK estimates that the right fiscal environment could unlock an additional four billion barrels which, while still not meeting domestic demand, would add over £200billion to the economy, support jobs, and drive investment into the UK’s energy supply chain.
What is being consulted on?
Ed Miliband's Department for Energy Security and Net Zero has published plans to establish an “internationally-leading offshore clean energy industry” in the North Sea.
It outlines an ambition for the North Sea to become a major hub for wind farms, carbon capture and potentially hydrogen production.
Analysis suggests that “there is an opportunity to ensure the decline in oil and gas workforce is matched or exceeded by jobs in adjacent industries,” the proposals said.
And it pledged to consult on a "new regime" for the industry in the North Sea, confirming new licences for oil and gas fields would not be approved.
Separately, HM Treasury and HM Revenue and Customs are confirming that the Energy Profits Levy will end in 2030. They are consulting on what a new regime could look like, to "respond to any future shocks in oil and gas prices".
The government says it will work closely with the sector and other stakeholders to develop an approach that protects jobs in existing and future industries and delivers a fair return for the nation, during times of unusually high prices.
What is the UK Government saying?
Mr Miliband said he wants dialogue with North Sea communities to help craft a plan for the future.
He said: "The North Sea will be at the heart of Britain’s energy future. For decades, its workers, businesses and communities have helped power our country and our world.
"Oil and gas production will continue to play an important role and, as the world embraces the drive to clean energy, the North Sea can power our Plan for Change and clean energy future in the decades ahead.
"This consultation is about a dialogue with North Sea communities – businesses, trade unions, workers, environmental groups and communities – to develop a plan that enables us to take advantage of the tremendous opportunities of the years ahead."
What has been the reaction?
Aberdeen & Grampian Chamber of Commerce has welcomed the consultation, but warned that leaving the windfall tax in place until 2030 - despite the complete absence of any windfalls - will cause lasting damage.
Russell Borthwick, Chief Executive at Aberdeen & Grampian Chamber of Commerce, said: “The UK is expected to use 15 billion barrels of oil and gas between now and 2050 but will produce less than four billion.
“With the right fiscal and regulatory environment, we know that the UK could unlock an additional four billion barrels which, while still not meeting domestic demand, would add over £200billion to the economy, support jobs, and drive investment into the UK’s energy supply chain.
“These are the pragmatic decisions the UK needs right now as it faces low growth and global tensions which have the potential to disrupt energy supplies.
“New fields are compatible with our climate ambitions and just last week the Climate Change Committee predicted that emissions from domestic production will fall a further 40% between now and 2040, even with new North Sea fields.
“It is a settled fact that we will continue using oil and gas for up to a fifth of our energy out to 2050, so we now face a choice: do we produce our own and reap the economic benefits, or do we simply import that energy from elsewhere. Let’s push our government to make the right choice.”
OEUK Chief Executive David Whitehouse added: “The UK offshore energy industry, including its oil and gas sector, is responsible for thousands of jobs across Scotland and the UK, and today the government has committed to meaningful consultation on the long-term future of our North Sea. That is important and welcomed. Energy policy underpins our national security – how we build a clean energy future and leverage our proud heritage matters.
“We still have oil and gas reserves in our offshore waters and we should use them responsibly alongside renewable energy. We must get this right and this means meaningful engagement."
View the consultation documents