Why new North Sea gas won’t fix Britain’s winter energy crisis

The oil and gas industry has welcomed the approval of the largest untapped gas reservoir in the North Sea as a boost for Britain’s energy security, but urged the chancellor to overhaul “punitive” taxes levied on operators in his upcoming budget. Jackdaw, which could account for about 6 per cent of UK daily supply once fully operational, is being developed by Adura — a joint venture between Shell and Equinor — and could be operational within weeks. Most commented 1 The Horses review — lunch with an influencer, Topjaw’s Jesse Burgess Food & Drink 82 comments 2 My father’s Facebook posts about ‘our special angel’ make me cringe Parenting 31 comments 3 Tripsnacking? Finally a travel trend I can get on board with Advice 40 comments 4 What we’re reading — by the Times books team Books 540 comments 5 Hugh Fearnley-Whittingstall: ‘My kids tell me to back off when they cook’ The Sunday Times Magazine 17 comments The gasfield could produce enough gas to heat the equivalent of about 1.4 million UK homes at peak production, Adura claims. Get drilling at Rosebank or risk diesel shortages, ministers warned The move comes as Europe prepares to enter winter with gas storage levels at multi-year lows. The UK’s gas storage levels are at just 40 per cent, according to Gas Infrastructure Europe, which equates to just two days of the country’s demand based upon the three-year average of consumption between October and March, according to estimates from Argus Media. Advertisement “The Jackdaw field will help to improve UK energy security — particularly important when the UK is realistically facing the prospect of blackouts this winter due to the parlous state of gas storage across the UK and Europe,” Ashley Kelty, an analyst at Panmure Liberum, said. Top stories 1 Tripsnacking? Finally a travel trend I can get on board with Advice 2 Belgium’s most stylish autumn weekend break — and it’s not Bruges Belgium 3 17 of the best cruise lines for solo travellers Cruises 4 This cosy hotel is perfect for an autumnal trip to the Lake District Lake District 5 How to see the northern lights: 15 top tips Adventure Top stories 1 A grand coastal bolt hole or a 17th-century rectory for £1.5m? Property & Home 2 Hugh Fearnley-Whittingstall: ‘My kids tell me to back off when they cook’ The Sunday Times Magazine 3 The Horses review — lunch with an influencer, Topjaw’s Jesse Burgess Food & Drink 4 From gold to tech stocks: how to build the perfect investment portfolio Saving & Investing 5 High street banks are on borrowed time Saving & Investing Neil McCulloch, chief executive of Adura, said Jackdaw represented £2.1bn of investment and called for Rosebank, the largest untapped oilfield in the North Sea, to be approved next. We need a fix for the UK’s energy market, not a blanket giveaway The North Sea’s output has been in decline for more than two decades, with the remaining deposits more expensive and technically difficult to extract. Oil and gas output fell to 1.1 million barrels of oil equivalent a day last year, about a quarter of the peak in 1999, according to figures from the government-owned North Sea Transition Authority (NSTA). Advertisement Most of the oil and gas majors have taken their spending to more lucrative fields elsewhere, with some smaller players looking to move in. However, oil and gas companies have claimed that their appetite in the North Sea has been constrained by prolonged windfall taxes on the sector, brought in under the Conservatives during the 2022 energy crisis and extended under Labour. It has resulted in North Sea groups paying a headline tax rate of 78 per cent, triggered when oil and gas hits a certain price. The windfall tax was extended until 2030 by Rachel Reeves last year. The industry has blamed fiscal uncertainty for pushing them to cut investment in the North Sea, with some, including BP, announcing plans to exit the waters altogether. Ahead of the budget, the North Sea oil and gas industry has called on chancellor John Healey to replace the energy profits levy with the oil and gas revenue levy — a permanent windfall tax triggered during periods of high prices. Advertisement Jim Ratcliffe’s Ineos, which owns offshore oil and gas fields in the North Sea, America and Denmark, said that while approving Jackdaw was the right decision, it would not stop the damage being done to the North Sea. “The North Sea Levy must be amended in the budget. This punitive tax has been an abject failure, even as a tax-raising mechanism. Tax receipts are going down, not up, while imports increase. The government is driving away the very investment that generates jobs, production and tax revenues. It makes no sense,” a spokesman for Ineos said. BP to set out new strategy as bumper oil profits cut into debt pile Under “the right fiscal and regulatory environment”, a broader pipeline of more than 100 North Sea projects could be unlocked, bringing forward more than three billion barrels of additional domestic production, Offshore Energies UK has claimed. That could help the UK meet at least half of its oil and gas demand up to 2050 from homegrown resources rather than imports, the industry lobby group has argued. Under the Climate Change Committee’s “balanced pathway” to net zero by 2050, oil and gas demand is set to fall by 65 per cent over the next 25 years as fossil fuels are phased out of the primary energy system, instead becoming a back-up for cleaner forms of energy. Advertisement However, that is still expected to leave the UK reliant on importing its oil and gas, according to NSTA forecasts based on demand projections from Britain’s official climate advisers, even if the net amount brought into the country is about 30 per cent of what it is today. As North Sea output has dwindled, the UK has become a net importer of its oil and gas since 2004. That now predominantly comes from Norwegian interconnectors and America, with the latter shipped in liquefied form from export terminals on the US gulf coast. Last year the UK imported about 46 per cent of its gas demand, according to analysis by Argus Media. “The prime minister has said the question is not whether we use oil and gas, but where it comes from”, David Whitehouse, chief executive of Offshore Energies UK said. “The answer, surely, is our own North Sea…supporting UK jobs, creating value across the UK economy and sustaining the supply chain needed to deliver our energy future.”