Keir Starmer has not definitively ended extraction of North Sea oil and gas; here's an explanation for the decision.
The United Kingdom's North Sea oil and gas sector, regulated by the NSTA (formerly known as the Oil and Gas Authority), is set for a significant transformation under Labour's new policy. The objective is to accelerate the transition to cleaner energy, reduce fossil fuel production, and meet climate goals.
According to the 1998 Petroleum Act, the NSTA's mandate is to achieve the greatest possible net economic value from oil and gas extracted in the North Sea. However, a fundamental reimagining of the NSTA's regulatory obligations could be necessary for Labour to put the climate at the heart of a new UK North Sea policy.
The NSTA's work involves reducing direct and indirect emissions from North Sea oil and gas production. This includes running drilling platforms on renewable energy, reducing gas flaring and venting, and addressing Scope 3 emissions, which account for 70-90% of total emissions from oil and gas extraction but are not currently addressed by the NSTA's mandate.
Keir Starmer, the Labour leader, recently announced that if Labour wins the next election, the UK will grant no new licenses for oil and gas firms to drill in the North Sea. Existing licenses, however, will continue, and using existing wells sensibly is baked into Labour's plans. This policy includes a sharply increased tax on oil and gas profits, up to 78%, and restricting new exploration licences.
The UK’s North Sea oil and gas sector is already in decline due to geological factors, with production unable to meet domestic heating needs by 2027 and increasing dependence on imports forecasted despite new licenses. Labour’s restrictions thus formally cement a transition trend driven in part by resource depletion as well as climate policy.
Comparatively, other countries have varied approaches. For instance, the UK’s 78% tax on oil and gas profits stands among the highest globally, indicating a very strong fiscal disincentive relative to other petroleum producers. On the other hand, some countries, such as France, have pursued more aggressive clean energy adoption, like heat pump installations contributing to greater job creation and emissions reductions compared to the UK.
The decision to terminate the UK's 60-year policy of offering new areas of the North Sea for fossil fuel extraction has been criticized by oil industry figures, union officials, and politicians. However, it aligns with the necessity to meet net-zero ambitions and shifts focus towards renewable energy sectors.
Winning the 2024 general election would place the NSTA under the control of a Labour government for the first time. Rewriting or unmaking the Petroleum Act would be required to remove the maximum economic recovery obligation from the NSTA, allowing for a more climate-focused approach in the UK's North Sea policy.
The International Energy Agency found that no new oil and gas fields are required to meet demand under a scenario in which the world reaches net zero emissions by 2050. This underscores the importance of Labour's policy, which aims to balance the tension between economic opportunities from fossil fuels and the urgent need to limit emissions. The UK's reliance on imports and declining North Sea reserves further complicate the impact, potentially creating near-term energy security challenges even as it seeks long-term sustainability.
- Under Labour's new policy, the transition to cleaner energy, such as renewable energy, is aimed to be accelerated in the United Kingdom's North Sea sector.
- The NSTA, responsible for regulating the North Sea oil and gas sector, may need to fundamentally reimagine its regulatory obligations to prioritize climate change.
- The NSTA currently does not address Scope 3 emissions, accounting for 70-90% of total emissions from oil and gas extraction, but this could change with a more climate-focused approach.
- Keir Starmer, the Labour leader, has announced that, if Labour wins the next election, no new licenses for oil and gas firms to drill in the North Sea will be granted, yet existing licenses will continue.
- Renewable energy sectors are expected to gain focus as the UK revises its policy on fossil fuel extraction, responding to the global need for net-zero emissions by 2050, according to the International Energy Agency.
