In 2014, a crash in oil prices triggered a severe and prolonged downturn for the North Sea energy sector, leading to tens of thousands of job losses in the oil and gas industry [838ebef9]. The north-east economy, which was heavily dependent on the oil and gas industry, was hit hard. The collapse in fortunes of the industry prompted the launch of Opportunity North East, a partnership aimed at diversifying and growing the north-east economy. The downturn also coincided with global efforts to tackle climate change, leading to a shift towards net-zero ambitions and the need for oil and gas firms to find new ways of operating. The downturn in the oil and gas industry also had knock-on effects on other sectors, such as hospitality, engineering, oil services, and retail. The industry was further impacted by the COVID-19 pandemic, which caused oil prices to plummet. However, Scotland's energy transition is creating new "green" jobs in offshore wind, hydrogen, and carbon capture and storage projects.
The UK government is introducing new licensing opportunities for oil and gas production in the North Sea to support the country's transition to net zero emissions [ecba30bd]. The North Sea Transition Authority (NSTA) will invite applications for new production licenses on an annual basis, providing certainty to investors and industry. The move aims to reduce the UK's reliance on imports from hostile foreign regimes and bolster energy security. Encouraging domestic gas production will result in lower carbon fuels for the UK and benefit families and businesses. Each licensing round will only take place if key tests are met, including the projection that the UK will import more oil and gas than it produces domestically. The government believes that domestic production from new fields in the North Sea can be cleaner than production from older fields, reducing emissions impact. The move is expected to unlock green investment and drive investment in clean technologies. The government emphasizes the importance of using homegrown resources, such as oil, gas, wind, and hydrogen, to ensure energy security and support the transition to clean energy [ecba30bd].
However, the offshore oil and gas sectors are facing a potential £13 billion economic hit over the next five years due to an increase in windfall taxes, as reported by Offshore Energies UK (OEUK) [0c0e4d36]. The Energy Profits Levy (EPL) is set to rise to 38% from November 1, 2024, raising the total tax rate for upstream oil and gas activities to 78%. OEUK chief executive David Whitehouse criticized the government's growth agenda, stating it contradicts the proposed tax increases. The report warns that this tax hike could reduce investments from £14.1 billion to just £2.3 billion between 2025 and 2029, putting approximately 35,000 jobs at risk and leading to a £12 billion drop in tax receipts due to reduced production. Whitehouse has called for collaboration with the government to protect jobs and manage offshore energy effectively [0c0e4d36].
The oil and gas industry currently supports over 200,000 jobs and contributes £16 billion to the UK economy annually. The UK is committed to achieving net zero emissions by 2050 and has achieved the fastest rate of greenhouse gas emissions reductions among G7 countries. The country is scaling up renewable energy supplies, including wind, solar, and nuclear power [ecba30bd].
Meanwhile, in New Zealand, the government plans to reverse a five-year-old ban on new oil and gas exploration. A bill to be introduced this year would end the ban that has only allowed exploration for new petroleum on some onshore fields in the country's North Island. Resources Minister Shane Jones claimed the ban had stymied international investment and left the country's known gas fields undeveloped [947a214d]. The ban reversal aims to attract international investment and rebuild investor confidence in the petroleum sector. The government plans to ease how petroleum exploration applications are tendered [947a214d].
The decision to reverse the ban is part of the government's efforts to transition to a low-carbon economy and reduce greenhouse gas emissions. The current government believes that ending the ban will help support economic growth and job creation in the energy sector. However, the move has received mixed reactions, with environmental groups expressing disappointment and concern about the impact on climate change, while industry groups welcome the decision as a positive step for the economy. Greens co-leader Chloe Swarbrick criticized the government's decision, stating that it goes against prioritizing clean energy [947a214d]. The change in policy is expected to take effect immediately [c4faa566].
These developments in both the UK and New Zealand highlight the complexities and differing approaches to oil and gas exploration and production as countries navigate the transition to cleaner energy sources.