Shapps: We ‘want and need’ oil and gas sector to reach net zero and protect UK’s energy security
The UK “wants and needs” the oil and gas sector to help reach net zero and protect the UK’s energy security, Grant Shapps told MPs today.
The energy secretary told the House of Lords’ Environment and Climate Change Committee that he believed the sector still has “a very important part to play” in the UK’s energy security goals, including reaching net zero.
In his view, expanding the windfall tax from 25 to 35 per cent (on top of the 40 per cent special corporation tax rate) was necessary to ensure households and businesses had sufficient support to deal with record energy bills.
He said: “We have taxed them billions of pounds and we have handed it to households. We have paid about half their energy bills, and a third to half of business bills. A lot of that was funded by taxing oil and gas firms at 75 per cent.
“But if they reinvest the profits, they’re not taxed. It also has an end – 2028 – and I will send the message loud and clear, ‘We think they are a very important part of our transition.'”
Fossil fuel exploration is included in the UK’s energy security plans as it looks to boost domestic energy generation to reduce its reliance on overseas vendors.
The cabinet minister also rejected Labour’s calls for no new oil and gas projects, arguing that there was “literally no point in cutting off our nose to spite our face” as the UK would be forced to import more carbon intensive fossil fuels from overseas to meet the country’s energy needs.
“That’s the logic of people who think we should stop oil and gas today. They fall into a sort of logic hole where we have more CO2,” he said.
Shapps noted that the Climate Change Committee and the Intergovernmental Panel on Climate Change have both forecast the need for oil production over the next three decades.
He explained the government was content with a seven per cent reduction per year in production in North Sea oil and gas, which he argued reflected the age of the basin, but with continued activity to ensure a smooth transition.
“I hope to be reassuring to our oil and gas sector that we both want them and need them,” he said.
Multiple oil and gas operators have raised concerns over investing in the North Sea with the current tax rate, with Harbour slashing jobs while both Total and Enquest have opted against domestic energy projects.
There are also concerns that doubling the duration of the windfall tax has toughened lending conditions from banks – making new projects harder to get off the ground.
A potential litmus test for the government’s commitment to the North Sea is Rosebank – the largest undeveloped oil and gas field in the North Sea.
Potentially home to 500m barrels, the site is roughly equivalent to eight per cent of the UK’s entire oil output between 2026 and 2030.
Ithaca, which owns a 20 per cent in the project, has been in talks with the government over the project – pushing for a price floor to be introduced into the EPL, as first reported by City A.M.
Shapps confirmed the project is still “not on my desk” – and awaits approval from multiple regulatory bodies before the government makes a decision on whether or not to rubber stamp the project.