Plans to ease restrictions on new oil and gas exploration in the North Sea will be revealed on Wednesday as part of the government’s North Sea strategy.
Chancellor Rachel Reeves will announce the publication of the strategy in the Budget, according to the BBC. The Department of Energy Security and Net Zero will publish a paper on this shortly afterwards.
The strategy is expected to contain a more liberal interpretation of a clear commitment to prohibit further oil and gas exploration using more generous expansions of existing fields.
This idea of allowing new drilling in a way that could be “linked” to existing fields was first floated at the Labor conference in September.
The results of the North Sea review will not directly refer to the decision being considered by ministers on whether to give the green light to the controversial Rosebank field, which Ed Miliband strongly opposed when in opposition.
This project is subject to a separate and ongoing regulatory and legal process. However, it is widely believed that the wider relaxation of the rules will increase the chances that Rosebank will ultimately be approved.
Tethers have historically been used for small, remote extensions of existing oil and gas fields that stray geologically into currently unpermitted seabed areas.
Rosebank is a much larger facility that requires its own production infrastructure.
There has also been speculation that the 78% windfall profits tax, which is due to expire in 2030, could be removed sooner.
The oil and gas industry has pushed in recent months for changes to the windfall tax, or energy profits levy, which they say is crippling the industry.
Investment is at an all-time low, with operators instead looking to spend their money in parts of the world where tax rates are more favorable.
A study from Robert Gordon University in Aberdeen estimates that around 1,000 jobs are currently being lost per month.
It is understood that the green light for “attachments” would be considered a hollow gesture without at least some concessions on taxation.
Some sort of “cap and floor” mechanism appears to be the most likely measure by the government, which would come into effect if oil prices return to high levels as they did in the aftermath of Russia’s invasion of Ukraine.
The industry says subsequent declines in the price of crude oil demonstrate that the “windfall” has now ended and that taxation should reflect this change.
Aberdeen & Grampian Chamber of Commerce chief executive Russell Borthwick has criticized the UK government, saying it is seriously wrong in its North Sea policy.
“This is the first step towards repairing the damage already done – but as long as the Energy Profits Levy remains in place, this isolated change will not stem the loss of jobs and investment in our oil and gas industry,” he said.
Mr Borthwick said retaining EPL would “guarantee thousands more jobs disappear”.
He predicts more companies will leave the North Sea.
“The Chancellor must signal today that this tax will be scrapped, and this change must happen in 2026 before it is too late,” he added.
