Ed Miliband has held talks with David Whitehouse, the new chief executive of industry group Offshore Energies UK, as Labour looks to strengthen relationships with the oil and gas sector.
City A.M. understands the pair met for the first time earlier this month, with the shadow secretary of state for climate change and the North Sea industry boss hoping to develop dialogue between each other.
Labour is currently 23 points ahead of the ruling Conservative Party, and is widely expected to win the next election in 2024 – making their plans for the North Sea increasingly relevant to the industry.
The opposition party backs the Energy Profits Levy, which was brought in by the Tory government and includes a 35 per cent additional tax on profits, on top of the 40 per cent special corporation tax rate.
It has also called for the levy to be toughened, and the featured 91p in the pound investment relief to be scrapped.
However, the opposition is highly supportive of the sector’s green energy transition and has also announced its target of zero carbon power by the end of the decade – which would require vast ramp ups in transmissions and cabling across the North Sea.
Meanwhile, energy giants such as Shell and BP have committed £25bn and £18bn to the UK’s energy sector over the coming decade – with a focus on low and zero carbon power.
In the past, Miliband has not minced his words when talking about the North Sea and the hefty profits made by oil and gas producers.
He accused the government of being “too weak” to stand up to energy producers in the face of sky-high energy bills, after Shell unveiled bumper £32.2bn record full-year profits in February.
“The government is letting the fossil fuel companies making bumper profits off the hook with their refusal to implement a proper windfall tax,” Miliband said.
Whitehouse is new to his role as chief executive, starting in the new year having previously led operator CNR International.
He replaced former boss Deirdre Michie – who contested the windfall tax vehemently last year, raising concerns it could reduce investment in the North Sea, especially after it was toughened by Chancellor Jeremy Hunt in his autumn statement.
Since then, Shell has confirmed it will have to look at new projects in the UK on a “case by case” basis, while Total Energies has pulled out of a £100m project in the North Sea, and Enquest has shelved a key domestic drilling project.
This has put more pressure on the government to boost exploration and drilling in a tough investment climate in line with its energy security strategy.
Under Whitehouse’s watch, OEUK recently wrote to the Chancellor, with proposals to reform the levy to incentivise investment in a mature and challenging basin.
It has called for the government to establish a trigger price which ensures the 75 per cent tax rate is only applied to company profits which are earned from a high market price environment, and a decarbonisation investment allowance to help meet the UK’s net-zero ambitions and the North Sea Transition Deal emission targets.
The industry body currently estimates the oil and gas left in the North Sea equates to 10-15bn barrels of oil equivalent.
The UK’s total energy consumption equates to around a billion barrels of oil a year so these reserves could support the country’s energy security plans over the coming decades if supported by investment.
Labour and OEUK have both been approached for comment.