June 7, 2023

5 Myths About Ending New Oil & Gas Licences and Permits

On Sunday, May 28th, the UK Labour party announced a world-leading pledge to end all new oil & gas licences and permits if it forms a government after the next election. In the ensuing weeks, there's been an onslaught of misinformation and half-truths put forward by the oil & gas industry and several government ministers. Here are the type five claims industry is making about an end to new oil & gas fields and the truth behind them.

1. Industry claim: Stopping new oil and gas fields makes the UK dependent on foreign imports, driving up prices.

The reality: New oil and gas fields do not lower bills and will do little to reduce imports, as most oil is exported anyway.

Prices for oil and gas produced in the UK are set by global or regional markets. More UK production does not lower UK prices. The Government admits this: increasing UK gas production does not bring prices down or lower our energy bills. 

Ambitious action to get fossil fuels out of our homes, transport and energy system is also vital. Getting off volatile, expensive oil and gas as quickly as possible matters more for people’s bills. The UK’s dependence on gas has been a key contributor to inflation, and has kept prices up in the UK.

This claim also makes it seem like oil from the North Sea goes straight into your car. This is not true. In 2022, 81% of UK oil production was exported. A significant proportion of UK produced gas is also exported, but the government does not produce statistics that enable this data to be tracked.

The UK’s oil and gas reserves in the North Sea are also falling, so new oil and gas doesn’t offer a viable alternative to foreign imports anyway. Since 2010, the Government has held seven offshore oil and gas licensing rounds, handing out hundreds of new licenses. This has yielded only two new commercial discoveries.

2. Industry claim: We will need oil and gas for decades, so let's keep drilling to use what we have.

The reality: This is a misleading claim designed to delay climate action. All credible pathways to 1.5°C require a huge reduction in fossil fuels.

This claim frequently references the UK Committee on Climate Change. It is based on the Committee on Climate Change’s model of how the UK could reach net zero emissions by 2050. The claim significantly downplays the scale of reduction in fossil fuels, and aims to use one scenario, in one model, to reduce our ambition for the future.

Tackling climate change requires a very significant reduction in burning oil and gas. For example, the models used to generate this particular claim show that by 2050, oil consumption is just 2-16% of that in 2018.

Industry use the claim to argue in favour of new UK oil and gas fields. But a large and credible body of research (summarised here) demonstrates that the emissions from planned and current investments in global oil and gas production will exceed global carbon budgets for 1.5°C and that global fossil fuel production has peaked and needs to decline. Governments are planning to produce twice the amount of fossil fuels in 2030 than would be compatible with limiting warming to 1.5°C, and the IPCC recently concluded that “current fossil infrastructure will emit more GHGs than is compatible with limiting warming to 1.5°C”.

Backed by this evidence, the head of the International Energy Agency and the United Nations Secretary-General have called for an end to oil and gas expansion and for declines in production.

You can have new fossil fuels, or limit warming to 1.5°C. You cannot do both. New oil and gas production contributes to pushing the world beyond 1.5°C.

3. Industry claim: A no new oil and gas policy throws workers on the scrapheap

The reality: Oil and gas workers and unions are demanding clear pathways out of high-carbon jobs.

Jobs in North Sea oil and gas are projected to decline significantly by 2030 anyway because of declining reserves. A planned transition away from oil and gas creates job opportunities in alternative adjacent energy industries, which oil and gas workers often have the requisite skills for.

The oil and gas workforce and their unions are clear that they would prefer jobs in alternative industries: they want more investment in domestic manufacturing and assembly of renewables and clear pathways out of high-carbon jobs

Around 30,000 people are directly employed in the sector, and a further 90,000 jobs are supported in the supply chain. Industry and government like to say that there are “200,000 working people in this sector”. That figure includes jobs supported by oil and gas workers’ spending, for example, a job in a pub in Aberdeen frequented by oil and gas workers.

Jobs in North Sea oil and gas are already projected to fall as oil and gas reserves and resources decline. The transition will create job opportunities. When no consents for new oil and gas fields are granted, modelling by Transition Economics shows that with the right policy support, job creation in clean energy industries can exceed the number of displaced oil and gas jobs by more than three-fold. 

There is a strong match between the skills of oil and gas workers and those required for a shift to renewables. The UK Offshore Energy review finds that over 90% of the UK’s oil and gas workforce have medium to high skills transferability and are well positioned to work in adjacent energy sectors. 

A planned transition away from fossil fuels is better for workers than a sudden decline in the industry in the future, where sudden announcements down the track could lead to oil and gas companies becoming insolvent or unable to bear the costs of winding down assets. This would leave workers and communities stranded and could impose a hefty cost on the Treasury.

4. Industry claim: UK oil and gas is “lower emissions”

The reality: This claim uses a selective comparison for gas emissions, excludes oil, and focuses only on production emissions. 

A lack of independent data makes this claim challenging to verify. But the claim appears to be based on a comparison between emissions from the UK’s most polluting gas imports - Liquid Natural Gas - and UK domestic gas production. This claim cannot be used more generally, as Grant Schapps does in this video when he falsely claims reducing oil and gas leads to importing “twice as much carbon”.

If we include both oil and gas, a report from the regulator, the NSTA shows that the UK is actually in the bottom half of the global league table for production emissions. This is because the UK uses polluting practices that are banned elsewhere, like flaring and venting. As a result, UK’s production is 2.5 times more polluting than Norway’s.

To fix this, the UK Government plans on subsidising oil and gas companies to reduce production emissions. This will take power that could decarbonise homes, and so will increase bills and benefit only oil and gas companies. The industry is currently off track to meet its 2030 emissions reduction targets. New fields - like Rosebank - could make meeting these targets impossible and the Comittee on Climate Change, the Independent Review of Net Zero Review and the Environmental Audit Comittee have all called for stricter targets.

5. Industry claim: Oil and gas companies are leading the transition. Stopping oil and gas production hampers their ability to invest in green technologies.

The reality: For every $1 dollar invested in low carbon, oil companies invested $48 in fossil fuels and a further $39 in shareholder payouts. 

Oil and gas companies do not use their profits to drive or manage the transition. Three quarters of UK oil and gas operators do not invest anything in UK renewables. Globally, only 1% of oil and gas companies spending goes towards low carbon. 48% goes to fossil fuels. The $1.5 trillion given to shareholders by oil and gas companies between 2020-2022 could have fully covered the global clean fuel investment requirements to limit warming to 1.5C until 2030.

Companies are making the choice to channel record profits to increased payouts to shareholders, raising executive pay: