Andy Burnham and his new Energy Secretary Miatta Fahnbulleh are preparing to decide on the future of two major North Sea fuel fields.
Fahnbulleh, who on Monday was elevated to the Cabinet for the first time in Burnham’s reshuffle, has the fate of the Jackdaw and Rosebank fuel fields in her hands.
The decisions she makes will have major consequences for Britain’s energy and climate policy, jobs, and Labour Party politics, although it is unlikely to take money off household bills.
Here’s why.
What are Jackdaw and Rosebank?
Jackdaw is a gas field 150 miles off Aberdeen, while Rosebank is 80 miles off north-west of Shetland and predominantly contains oil reserves.
Both fields have been waiting for a ministerial decision on their future for more than a year after the Court of Session in Edinburgh ruled that they had been unlawfully approved.
While the Labour manifesto pledged not to approve new licences, it said it would honour existing ones.
The court said that the Government had failed to consider the climate impact of burning the oil and gas extracted from the fields and that a more detailed climate assessment and fresh approval was required before production could start.
The matter had been sitting for months on the desk of Fahnbulleh’s predecessor, Ed Miliband, because the decision about whether to grant approval or not is a ‘quasi-judicial’ responsibility of the energy secretary.
What is Fahnbulleh likely to decide?
Burnham has struck a different tone to drilling in the North Sea compared to Sir Keir Starmer and Miliband, who generally stood in the way of new production.
Fahnbulleh and other ministers in Burnham’s Cabinet have promised a “pragmatic” approach, and The Times reported on Thursday that the Government is ready to “move quickly”, with a decision on the projects expected within weeks.
Would the projects cut bills?
The consensus is that Jackdaw and Rosebank would not lower bills in themselves. The same goes for expanded drilling in the North Sea more broadly.
Oil and gas from British waters is sold on global markets, and because the North Sea is a ‘mature’ basin where most of the large and easily-accessed reserves have already been removed, the UK cannot drill enough fuel to lower world prices. In essence, the price of gas and oil is out of the UK’s hands, even for the resources it produces itself.
However, advocates of drilling claim it could indirectly lower bills. Expanded production would generate tax revenues, and it would be up to the Government to decide what to spend this on – including potentially subsidising bills or rolling out energy efficiency enhancements to homes.
When Wes Streeting was preparing a run for the Labour leadership in June he said that he would earmark tax revenues from Jackdaw and Rosebank to pay for “insulation, heat pumps, and electrification to cut bills and emissions”.
What other potential upsides are there?
The clearest one is jobs, with the developers of the fuel fields claiming they will support 3,500 jobs at peak construction and hundreds more in the wider supply chain.
Some economists argue that producing more of our own oil and gas rather than importing it from foreign countries would improve the UK’s balance of payments, which would strengthen the pound and have a positive impact on inflation.
There is also an energy security angle. North Sea advocates argue that producing a greater share of our energy domestically is more secure than relying on imports which can be disrupted by conflict – as we are seeing in the Middle East – or potentially wielded against the UK as a political weapon by exporting nations. The owners of the Jackdaw gas platform have said that if it is not approved there could be the risk of domestic supply shortages this winter.
Finally, with £1.5bn sunk into Jackdaw already by Adura – a joint venture between Shell and the Norwegian state energy firm Equinor – pulling the plug would likely damage business confidence.
What about the climate impact?
Environmental campaigners argue that the projects will not materially improve energy security and that the climate impact is unacceptable. Doug Parr, Greenpeace UK’s chief scientist, has said that “any new oil and gas field approval is wholly incompatible with keeping global warming to 1.5°C”.
However, even without the fields the UK will continue to use oil and gas for decades to come, and the fuel will have to come from somewhere if not the North Sea. In its updated environmental impact assessment, Adura said that using gas from Jackdaw would be less carbon intensive that the alternative of relying on liquified natural gas (LNG) obtained from fracking in the US. According to its assessment, imported American LNG generates about 20 per cent more emissions compared to gas drilled domestically.
How will it effect the internal politics of the Labour Party?
Labour’s 2024 general election manifesto – which Burnham has pledged to stand by – vowed not to issue new oil and gas exploration licences . However, because Jackdaw and Rosebank were originally approved in 2022 and 2023 respectively, they do not count as new licences.
The Parliamentary Labour Party is divided on the future of the North Sea. If the fields are approved it will delight Labour-supporting unions like GMB and Unite, Scottish Labour MPs concerned about jobs in the north-west of Scotland, and other MPs who want more of a focus on industry. However, it will infuriate the party’s environmentalist wing – particularly if the Rosebank oilfield is authorised.
Even if the fields are approved, some Labour MPs want the Government to go further by scrapping the ban on new licences altogether. This seems unlikely to happen under Fahnbulleh, who is a close ally of Miliband’s and previously urged the UK to achieve net zero by the mid-2030s rather than the 2050.
One pro-drilling MP told The i Paper that the new ministerial team in DESNZ – which includes another Miliband ally, Polly Billington – “feels like little change at all”. They added: “I worry that it makes a mockery of [Burnham’s] reindustrialisation pledge.”
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