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The Labour government is expected to ban new North Sea drilling licences from companies whose applications are already being processed, marking a radical break from its predecessor less than a week after taking office.
Energy secretary Ed Miliband is considering blocking outstanding applications made as part of an oil and gas licensing round that opened in late 2022. The government is “working through” the process alongside the regulator, one person with knowledge of the situation said.
Labour had pledged during the general election campaign to stop issuing new oil and gas licences, while not revoking existing licences, as part of its net zero decarbonisation plans.
But the potential move to block applications already in the pipeline would go beyond what some in the industry had expected, and risks a clash between the new government and unions who are concerned about widespread job losses.
One industry figure said the mood in the sector was “gloomy” and warned the potential move — along with Labour’s plans to increase the windfall tax on the sector — risks accelerating the decline of the ageing basin.
“I don’t think anyone was completely confident about what would happen but the working assumption was that the round would go through,” the person added.
The potential move would affect about roughly half a dozen applications, from three companies, according to officials with knowledge of the process, under the 33rd licensing round launched last year. The round has already resulted in dozens of new licences being issued.
The Department for Energy Security and Net Zero denied a report published earlier on Thursday by the Daily Telegraph that Miliband had already over-ruled his officials and ordered an “immediate ban on new drilling” that would stop the final applications in the 33rd round.
Yet the government did not deny that Miliband’s eventual intention was to stop those licence applications from being granted by the North Sea Transition Authority. “We are still working through this and will go through the proper processes and not be bounced into an announcement,” said a government figure.
Labour’s manifesto set out plans for the party to cease all new licences for drilling in new gas and oilfields in the North Sea.
It wants rapidly to ramp up wind and solar power instead, and has set an interim commitment of cutting emissions from electricity generation to net zero by 2030.
But its stance towards the North Sea has been criticised by the fossil fuel industry and by Unite and the GMB, two unions that have traditionally backed Labour and given it regular donations.
Critics argue that the policy does not make economic sense when the UK will continue to use huge volumes of fossil fuels even as it gradually shifts to a low-carbon economy. Fossil fuels accounted for 78.5 per cent of the UK’s energy mix in 2022, according to government figures.
But the new administration wants to send out a message about its commitment to tackling climate change. This week it has also eased planning rules for onshore wind turbines in England, and has recruited the former chief executive of the Climate Change Committee advisory body, Chris Stark, to push forward its plans for renewable energy.
The energy security department said: “As previously stated, we will not issue new licences to explore new fields. We will also not revoke existing oil and gas licences and will manage existing fields for the entirety of their lifespan.
“We are working with the North Sea Transition Authority to ensure a fair and balanced transition in the North Sea.”