Ed Miliband has told the energy industry that he will not ban oil and gas drilling in the North Sea after claims that he had overruled officials and imposed a moratorium on new licences.
The energy secretary moved to reassure producers after reports that he intended to block dozens of licences and impose an immediate ban on drilling in new North Sea fields.
The suggestion had led to panic in the industry as it appeared to go beyond Labour’s position during the election campaign that it would continue to support the exploration of new oil and gas fields where licences had already been granted. “We’ve been fielding calls all day from panicked executives who thought their firms were about to go bust,” one official said.
The Tories said Labour was waging “war” on northeastern Scotland and accused Miliband of “economic and environmental illiteracy”.
A spokesman for Miliband called the claim a “complete fabrication”. Labour’s policy was unchanged, he added, and it would honour all existing exploration licences and “manage existing fields for the entirety of their lifespan”.
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“As previously stated, we will not issue new licences to explore new fields,” he said. “We will 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.”
There is still concern that a planned windfall tax on the profits of oil and gas producers may deter investment. However, one source said that although some producers were “really worried”, others were more relaxed. “There is no real evidence at the moment that it is going to put off investment, but it is still early days.”
The Conservatives made future exploration of Britain’s fossil fuel reserves a key issue at the election, pledging to legislate to guarantee annual licensing rounds.
However, the bill was never passed and Miliband has made clear that although Labour will honour existing contracts, it will not allow new licences.
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The change is understood to have left a small number of projects still being assessed by the North Sea Transition Authority (NSTA) in limbo. In the 33rd offshore oil and gas licensing round, started by the last government, 76 companies submitted 115 bids to drill for oil and gas across 257 “blocks” of the North Sea, Irish Sea and East Atlantic. The NSTA said that these would boost the UK’s oil output by 600 million barrels.
A source said that the vast majority of the licences had been granted and that about five were outstanding when the election was called. It is possible these may be rejected but officials stressed that no decision had been made.
Offshore Energies UK, which represents the industry, said that production was already falling by 8 per cent a year and that this would rise to 15 per cent without new drilling. David Whitehouse, its chief executive, said: “We remain deeply concerned that some of the new proposals being put forward for our industry will undermine the energy transition we all want to deliver.
“Labour’s leadership has recognised that North Sea oil and gas will be with us for decades to come and they have committed to managing this strategic national asset in a way that does not jeopardise jobs. They now need to deliver on their commitment to support our industry.”
