North Sea Energy

Earl Russell Excerpts

Wednesday 12th March 2025 Lords Chamber

[Lord Offord of Garvel (Con)]

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.

[Earl Russell (LD)]

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?

[Baroness in Waiting/Government Whip (Baroness Blake of Leeds) (Lab)]

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.