The UK’s largest trade union and financial backer of Labor staged a protest on Thursday and published an open letter calling for a reconsideration of the ban on oil and gas extraction. The letter was signed by almost 200 local businesses from Scottish towns that rely on the oil and gas industry.
One of the policy areas on which the Labour Party has been very specific during the election campaign is its approach to oil and gas production in the North Sea.
The party has made it clear that it will increase existing windfall taxes hit first Oil and gas producers in the North Sea by 2022 Rishi Sunakwhen he was chancellor he took the total tax level from the current 75% to 78%.
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Ed Milibandthe shadow secretary of state for energy security and net zero emissions, is also proposing to scrap the tax breaks Sunak introduced with the windfall tax, which allowed manufacturers to deduct their investment in new production from their tax bills.
Mr Miliband, who has called these tax breaks ‘loopholes’, argues that this would bring the tax treatment of the British North Sea into line with that of the Norwegian North Sea. He is also proposing a ban on new oil and gas exploration licences as part of what remains of his ‘green prosperity plan‘.
Of Work so far ahead in the polls, that is to say has already taken effect on investment in the North Sea, with a trio of companies – Jersey Oil and Gas, Serica Energy and Neo Energy – announcing earlier this month that they were delaying the planned start of production at the Buchan oil field, 190 kilometers away, by a year. northeast of Aberdeen.
Attacks from the industry
Serica, which has produced an average of 43,781 barrels of oil or oil equivalent per day so far this year, today sought to remind politicians of the potential consequences of their actions.
David Latin, chairman and interim CEO of Serica, angrily attacked the proposals. He told shareholders: “I have been in this industry for over 30 years and have worked all over the world.
“Aside from the time I was responsible for a company with significant assets in a war zone, I have never experienced a situation where making investment decisions and planning for the future in general has been as challenging as it is right now. The United Kingdom.”
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Mr Latin reminded his audience that Britain consumes almost twice as much oil and gas as it produces and said the deficit would persist even if the country tried to reduce its consumption of hydrocarbons, closing the gap filled by imports.
He added: “These imports worsen our national balance of payments, only create jobs and taxes abroad, and generally create higher carbon emissions from manufacturing and transportation by the time they reach our shores.”
Addressing Misconceptions
Criticism of the Conservatives for maintaining windfall taxes despite oil and gas prices having returned to historically normal levels and Labor for proposing to increase those taxes, Mr Latin said there were a number of misconceptions around the tax regime – not least the idea that the windfall tax is paid largely by oil majors such as Shell and BP.
He continued: “As for the claim that the tax is paid by the ‘oil and gas giants’, it is in fact independent companies like Serica that are most affected. The ‘majors’ account for only around a third of UK production and the vast majority of their profits are made overseas and are not affected by the rising tax rates on UK production.
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“For companies like Serica that continued to invest in their assets during periods of lower commodity prices prior to the invasion of Ukraine, the current fiscal regime represents a further punishment for risk capital that was put into their portfolio during the very low commodity prices seen in the COVID period.
“Closing ‘loopholes’ in the UK oil and gas tax seems to mean different things to different people.
Whatever is meant, I want to be crystal clear that reducing the capital expenditure tax credit below the rate at which tax is paid would make investment in the vast majority of UK North Sea projects unprofitable, meaning that these projects, and the jobs and taxes and revenue they would generate, simply will not happen.”
Trade union criticism of Labour
But criticism of Labour’s policies also came from another quarter today.
Unitethe UK’s largest trade union and traditionally Labour’s biggest financial supporter, is also concerned about banning new oil and gas exploration permits. This could force the United Kingdom to import more gas, while it still has sufficient gas itself.
Today it published an open letter urging a reconsideration of the ban, signed by almost 200 local businesses from Scottish towns that rely on the oil and gas industry – while some of those companies joined Unite members in a demonstration outside the Aberdeen Maritime Museum.
Sharon Graham, Unite General Secretary, said: “Until Labour has a concrete plan to replace North Sea jobs and ensure energy security, the ban on new oil and gas exploration licences must not be implemented.
“Labor cannot allow oil and gas workers to become this generation’s coal miners. Scotland’s oil and gas communities are crying out for a secure future and that is what Labor must deliver.”
Businesses are warning that Labour’s policies will lead to investment elsewhere and unions are concerned about the impact on jobs and local communities in the north-east of Scotland. Others, however, think the party can go even further.
It doesn’t go far enough
While Unite held its demonstration in Aberdeen, around 50 protesters from a group calling itself Stop Polluting Politics staged a demonstration 550 miles (896 kilometers) to the south at the Labour Party headquarters in Southwark, southeast London.
They claim the party has “financial ties to polluting companies” and have criticized a decision by the party Rachel Reevesthe shadow chancellor accept a campaign donation of £10,000 from Lord Donoughue, a Labor peer who was in the past chairman of the Global Warming Policy Foundation – a lobby group skeptical about climate change.
They claim that Ms Reeves’ decision to “water down” Mr Miliband’s “green prosperity” plan in February this year was influenced by the donation – something Lord Donoughue himself has vehemently denied.
It underlines how energy policy risks becoming a major problem for Labor if they win the election next week.