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New legislation to mandate annual North Sea oil and gas licensing rounds will be at the heart of the King’s Speech on Tuesday, as Rishi Sunak looks to exploit a policy divide with Labour ahead of the next UK general election.
The prime minister says the bill, which would allow companies to bid yearly for new licences to drill for fossil fuels in the North Sea, would protect jobs and strengthen Britain’s energy security by reducing its exposure to volatile international markets.
Claire Coutinho, energy minister, added on Monday that some of the revenue generated by the licences could help fund the transition to clean energy and other government priorities.
“If you were to forgo that domestic production you would not get the tax revenues to fund public services,” she told the BBC. Coutinho said the government was not claiming the move would necessarily bring domestic energy bills down.
The legislation, which comes in the wake of the energy shock sparked by Russia’s full-scale invasion of Ukraine, will allow Sunak to highlight how his “pragmatic, proportionate and realistic” approach to achieving net zero by 2050 contrasts with Labour’s policies.
The main opposition party has an average 20-point polling lead over the Conservatives ahead of the election expected next year, and has said it intends to make Britain a “clean energy superpower”.
Britain at present relies for most of its energy needs on oil and gas, which are forecast to remain part of the country’s energy mix beyond 2050.
However, the North Sea Transition Authority, the regulator, has acknowledged that any new licensing will do little to reduce Britain’s dependence on imports or affect prices of oil or gas significantly, given that the basin’s reserves are in decline and the commodities are traded on international markets.
Separately on Monday, BP announced it had started production at a new field in the North Sea called Seagull, which will produce 50,000 barrels of oil equivalent a day once fully ramped up.
Seagull, while representing only 3-4 per cent of UK output at peak, was deemed economically viable to develop as it ties into existing pipeline and gathering systems to carry the oil and gas ashore to the UK.
Sir Keir Starmer has said that if Labour wins power it will honour existing licences, but he has ruled out granting any new ones. Instead, the party will prioritise significant investment in nuclear and renewable energy sources.
In September, Sunak pushed back a ban on the sale of new petrol and diesel cars from 2030 to 2035 and relaxed the phaseout target for the installation of new gas boilers.
The prime minister is attempting to regain political momentum following damaging revelations about the UK’s response to the pandemic in the Covid-19 public inquiry, and lurid claims about unnamed Tory MPs in a new book by former culture secretary Nadine Dorries.
The King’s Speech is expected to set out new bills on crime and sentencing, leasehold reform and the creation of an independent football regulator in England.
The plans to step up oil and gas licensing, which apply to the area of the North Sea over which the UK has jurisdiction, come after the NSTA last month offered the first batch of 27 new licences as part of a round launched in October 2022.
Before then, the process had been paused since 2020 as the government reviewed the climate impact of oil and gas exploration.
The legislation will be caveated with key net zero tests that must be met before a new round is launched each year.
One energy industry figure said the legislation would not necessarily lead to more oil and gas production because the NSTA would not be compelled to issue licences for a minimum number of blocks.
“In theory they could issue just one or two blocks or they could issue 50, which does make you wonder how much of this is political posturing,” he said.
Ed Miliband, Labour’s shadow energy secretary, described the bill as “a stunt which does nothing to lower bills or deliver energy security”.
“We already have regular North Sea oil and gas licensing in Britain, and it is precisely our dependence on fossil fuels that has led to the worst cost of living crisis in generations,” he added.
David Whitehouse, chief executive of Offshore Energies UK, a trade body, welcomed the prospect of a “predictable licensing process with transparent checks” each year. “The UK needs the churn of new licences to manage production decline in line with our maturing basin,” he said.
But Tessa Khan, executive director and founder of campaign group Uplift, said the government was selling a “pipe dream”, adding: “More North Sea licensing will do vanishingly little for the UK’s energy security and nothing for our unaffordable energy bills.”