Following Denmark's announcement to halt its North Sea production last week, activists and regulators are calling on the U.K. to do the same. Critics argue the withdrawal from North Sea production is necessary for Britain's commitment to cut carbon emissions and tackle climate change to be achieved. However, with hundreds of thousands of jobs tied to U.K. production, this is not an easy feat. In 2018/19, the U.K.'s annual government revenue from offshore oil and gas extraction from the North Sea was valued at £1.2 billion. The exploitation of North Sea oil has been key in meeting the oil needs of several EU countries, as well as China and the USA.
Last week, Denmark pledged to stop extracting oil from the North Sea by 2050 as part of the country's plan to become carbon-neutral. Climate minister Dan Jørgensen highlighted Denmark's intention to move away fossil fuels towards more sustainable energy sources as one of the main reasons.
Likewise, Prime Minister Boris Johnson stated the ambitious objective last week to cut national carbon emissions by 68% by 2030, a faster rate than any of the other major economies. However, he has been vague in how this objective will be achieved. To date, no announcement has been around curing the country's oil extraction from the North Sea, which contributes heavily to global warming.
Ken Penton, UK climate campaigner for the international NGO, Global Witness told the Guardian "If the UK is to be a real global climate leader, it must follow Denmark's lead by stopping issuing new oil and gas exploration licences and delivering a managed phase-out of oil and gas extraction".
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Part of Johnson's promise is for the U.K. to be a net-zero emitter of greenhouse gases by 2050. Yet without a clear strategy, involving the energy industry and the future of the country's oil extraction, this is unlikely to be achieved.
In November, as part of the plan, Johnson announced a ban on the sale of new cars and vans powered entirely by petrol or diesel from 2030. A total of £12 billion has been allocated for the implementation of the PM's "green industrial revolution". This is expected to drive down the demand for oil in the U.K.
A Common Home Plan is also being explored, as part of Scotland's Green Deal, which would see all houses on the gas grid connect to a low carbon district heating scheme, to be powered by large-scale renewable heat generation at a cost of £50 billion. This builds on existing examples from Nordic states and aims to dramatically reduce carbon emissions. This is just one of several of Scotland's plans to transition away from oil-reliance.
Despite calls to halt North Sea extraction to manage climate change, many question the impact this would have on the U.K.'s oil workers. Currently, an estimated 269,000 jobs are supported by North Sea oil in the U.K., which produced sales of £24.8 billion in 2018, at an annual increase of 30.1%.
2020 has already been a difficult year for many North Sea workers as 30,000 are under threat of unemployment when the U.K.'s Covid-19 furlough salary scheme comes to an end next year. After an extension of the scheme was announced in October, to manage employment challenges under new restriction measures, those at risk are temporarily safe. However, unless restrictions are lifted and demand for oil goes back to pre-Covid levels, many workers remain at risk.
As countries from around the globe are offering their nationally determined contributions (NDC) for the Paris Agreement before the end of 2020, we are seeing a greater call for renewable energy over fossil fuels. However, unless clear national strategies are established for the dramatic change across the energy industry, it could cost millions of jobs. So, while the transition to renewables may be vital in the long-term, Johnson and other country leaders must tread carefully when planning for the future of oil.
By Felicity Bradstock for Oilprice.com
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Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK. More
Comments
Although UK’s annual government revenue from offshore oil and gas extraction from the North Sea in 2018/19 was valued at £1.2, currently an estimated 269,000 jobs are supported by North Sea oil in the UK, which produced sales of £24.8 bn in 2018.
UK Prime Minister Boris Johnson’s stated objective to cut national carbon emissions by 68% by 2030 is an illusion. And so is also his promise that the UK will be a net-zero emitter of greenhouse gases by 2050 and also his announced ban on the sale of new petrol and diesel cars from 2030.
The notions of zero emissions and an imminent global energy transition from oil and gas to renewables are mere illusions. The global economy will continue to be driven by oil and gas throughout the 21st century and probably far beyond.
Still, I wouldn’t be surprised if the UK was subjected to intense pressure to abandon North Sea oil exploration by a clique of analysts, media, investment banks, militant environmental activists and hydrocarbon divestment campaigners.
Take for instance the case of London Heathrow airport. This international hub employs 75,000 people and supports another 230,000 jobs and also contributes 10% to the United Kingdom’s GDP. It badly needs a third runway so as to expand its aviation activities which promise to enhance its contribution to the British economy. And yet, excessive militant pressure from environmental activists has so far thwarted every attempt by the government to add a third runway. This is a case when militancy and dogmatism prevail.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London