The future of the North Sea: three priorities for the UK government

The UK is at a critical juncture in its energy policy, particularly concerning the future of the North Sea. 

Our oil and gas reserves, as well as the number of jobs supported by the industry, are in decline. Add to this the climate crisis, which requires the rapid phase out of oil and gas production, and the need for a fair transition to clean energy is both obvious and urgent.

The North Sea’s capacity to deliver power, jobs and wealth for Scotland and across the UK presents us with a huge opportunity, but it will require this government to address head on the political and policy failures of recent years. 

Three areas require immediate focus: 

1. Securing the benefits of the transition for workers and communities through a detailed and coherent long-term just transition plan. 
2. Aligning UK energy policy with climate science by halting new licensing for oil and gas exploration and ending new oil and gas developments. 
3. Rebuilding the North Sea in the public interest by reforming the way that the basin is governed.

Securing the benefits of the transition for workers and communities‍

After nearly 50 years of drilling, the UK’s transition away from oil and gas production is happening but without a plan to ensure that workers and the communities the oil and gas sector supports, as well as the wider public interest, benefit from the shift to clean energy. 

It is indisputable – and a matter of geology – that the North Sea basin is in decline, with production and jobs falling despite concerted state intervention to increase output. The amount of gas produced from the hundreds of new licences issued since 2010 amounts to just over two weeks worth of UK demand. Jobs supported by the oil and gas sector have more than halved in the past decade – from 440,000 in 2013 to just over 200,000 today – and are predicted to continue to fall, regardless of any intervention by government.

Despite the pressing economic and social challenges stemming from the North Sea’s decline, there is currently an absence of policy to mitigate the harms and maximise the benefits from the basin’s transition to clean energy. Instead, the oil and gas industry has been given a pivotal role in determining the transition’s shape and pace, which has seen it prioritise narrow commercial concerns over wider public benefits. 

The UK government’s commitment to a ‘just transition’ for the North Sea is welcome, as is the immediate priority given to the future of the Grangemouth oil refinery by the Prime Minister. The task ahead, however, will require a detailed and properly funded long-term just transition plan to ensure that economic prosperity is maximised and shared.

The plan must start with genuine dialogue between Holyrood and Westminster, unions and supply chain companies, clean energy companies and those oil and gas firms willing to invest in the transition. It must get into the specifics of where and how opportunities will be created, backed up with investment, and pay attention to workers’ needs, making it easier to retrain, providing job guarantees, and improving the quality of offshore energy jobs. Mechanisms such as the British Jobs Bonus, the National Wealth Fund and Great British Energy need to be designed with communities and workers at their heart – not just the interests of private capital. 

From unions to climate campaigners, the call is the same: we need a proper plan for a just transition. You can read more about what we think this should include here.

Aligning UK energy policy with climate science

The climate science is clear: there is now no room for new oil and gas projects on a path to limiting global temperatures to 1.5C, the internationally agreed guardrail for a safe climate. Every new development is a bet against our collective climate goals and a stable environment. 

The UK government’s plan to end new licensing for oil and gas exploration is, therefore, very welcome and should be implemented in the proposed Energy Independence Act. It will make the UK the first G7 oil and gas producer to signal an end to new exploration and a major step forward globally that bolsters the UK’s reputation for climate leadership. 

While this is a courageous if long overdue step, it is not sufficient to align the UK with climate science or our international commitments. The obvious delivery gap will be brought into sharp focus by a recent Supreme Court ruling that will, for the first time, compel decision-makers to take into account all emissions from new developments – including the vast majority that are produced when the fossil fuels are burned – before approving a new project. As a result, decisions by the previous government to approve new oil and gas projects that are currently being challenged in court may need to be remade. This must be done in line with climate science, which demands that there can be no new oil and gas developments if we are to have a hope of staying within safe climate limits. As one of the world’s biggest CO2 emitters historically, it is also right and necessary that UK decarbonises further and faster than others.

The imperative to align the UK’s oil and gas sector with our climate commitments, coupled with the need to deliver a fair transition, underscores the urgent need for a long-term plan for managing the basin’s decline while boosting the UK’s resilience through clean energy. 

Rebuilding the North Sea in the public interest

The North Sea holds the key to green prosperity and UK energy resilience but transitioning to this from today’s ageing oil and gas basin will require government, investors and industry to work together towards this shared goal. Delivering this change will require reform of the way that the basin is governed. 

For the past decade, much of the governance of the North Sea has sat outside of government. The way offshore oil and gas is managed stems from a review, led by a billionaire oil executive, that explicitly sought to maximise extraction from the UK’s oil and gas reserves but failed to plan for jobs and communities. It means that, today, responsibility for managing the basin’s resources, including decisions on new oil and gas projects, sits with an independent regulator, the North Sea Transition Authority. In addition, the oil and gas industry has also been handed much of the responsibility for determining the North Sea’s future, through a non-binding, government-industry agreement, the North Sea Transition Deal.

There is now an urgent need to move governance of the North Sea away from this principally hands-off, market-led approach and refocus it on the public interest to ensure the UK reaps the multiple wider benefits from the UK’s transition to clean energy – from increased energy security and economic growth, to supply chain opportunities, job creation and community wealth-building, alongside private, commercial gain.

To effectively deliver its clean energy mission, the government needs to be able to strategically manage and coordinate the energy transition across multiple industries and interests. As such, the arms-length regulator should be brought closer to government with responsibility for decisions on new oil and gas returned to the Secretary of State. The pace and direction of the oil and gas sector’s transition also need to be taken out of the industry’s hands and replaced with a fair transition plan created through genuine dialogue between all stakeholders. 

The principal statutory objective underpinning decision-making on oil and gas – that of ‘maximising economic recovery’ – needs to be removed to align with the government’s mission to seize the opportunities of clean energy and tackle the climate crisis.

A subsequent review of the fiscal regime covering the North Sea is also needed to ensure that tax rates and incentives are aligned with the government’s overall objective of making Britain a clean energy superpower. 

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