Oil and gas vote is a political boost for PM – but won’t help our energy needs
The passing of the Offshore Petroleum Licensing Bill to its next stage is good news for Rishi Sunak.
MPs gave the bill a second reading by 293 votes to 211 on Monday evening, with the government securing a majority of 82.
The prime minister is a man, remember, who said he wants to “max out” drilling for North Sea oil and gas.
There’s been outcry, of course, from environmentalists, the clean energy industry, his political rivals and even some within his party.
But anger at the bill plays into the hands of Mr Sunak. Because it’s not really about energy security at all, but politics.
Number 10 is banking on using strong rhetoric around the continued need for oil and gas as part of its strategy of being “honest” with the public about the reality of ambitious net zero targets.
A strategy it hopes will win votes among those who’ve read headlines about the costs of a net zero transition and angry about protests by people like Just Stop Oil.
Others, including some Conservatives, argue it’s more cynical than that – an attempt to foment a “culture war” around net zero and the economic and social upheaval it will bring, to win a few much-needed votes in the next election.
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Trivial gains
Now the government does have a point on the need for locally sourced natural gas.
Not a lot of campaigners like to admit this, but about 80% of the UK’s energy still comes from fossil fuels – most of it now gas. Even today, half the gas we use domestically is produced in the North Sea.
But does that mean the Offshore Petroleum Licensing Bill is going to help with that?
In short, no. The additional gas a new licensing regime might yield is trivial.
Yet there’s plenty of anti-net zero sounding rhetoric coming from the government.
Energy Secretary Claire Coutinho told the Commons on Monday evening that those opposing the bill are “putting the interests of extreme climate ideologues over the interests of ordinary workers”.
Yet despite talk of “maxing out” the North Sea, the government says it remains committed to an economy-wide transition to low carbon energy that climate science says is necessary and also inevitable.
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All the more reason, argues the government, that it supports the oil and gas industry. The bill, it claims, will protect 200,000 jobs directly and indirectly connected to the offshore fossil fuel industry.
And it is true, many of these jobs are the highly skilled ones that will be needed in the transition to low-carbon energy. Building a floating offshore wind turbine is very similar to building a floating oil platform.
Only oil industry experts – including Lord Browne, the former CEO of BP – have pointed out tweaks to oil licensing won’t help secure those jobs.
The industry is in decline anyway. The only way to protect jobs is with a meaningful shift in support for the low-carbon economy.
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Loud shouting
The government is funding a switch to renewables – including offshore in the North Sea. But, in the absence of a coherent energy strategy, the fossil fuel rhetoric really doesn’t help accelerate the clean transition it says it wants.
Companies wanting to invest in in low-carbon alternatives in the UK hardly see themselves as “extreme climate ideologues”.
By shouting louder about the need for locally produced fossil fuels, than the need to support low carbon energy it makes the UK look like a less reliable place to invest.
What of the Opposition? Despite having more of the facts laid out above on its side, Labour is also making political capital by opposing the bill – arguing it’s the only party that can deliver a transition that’s fair for workers.
But it’s going to have problems of its own delivering that if it finds itself in government later this year.
Hundreds of thousands of jobs in the fossil fuel economy from offshore workers to gas and heating engineers will need to “transition”.
But unions, many representing those too close to retirement to retrain to install wind farms or heat pumps, won’t support that enthusiastically.
Either way, playing politics with net zero isn’t going to help. The energy transition in the North Sea is happening anyway – the one all parties want to see is one that preserves as many jobs as will be inevitably lost as the oil and gas reservoirs decline.
That requires a coherent, costed and bold plan to manage what some see as the biggest economic and societal upheaval since the industrial revolution.
Most energy experts agree no political party is presenting us with one of those at the moment.
Business
Vivergo: How US-UK trade deal could bring about collapse of huge renewable energy plant in Hull
The smell of yeast still hangs in the air at the Vivergo plant in Hull but the machines have fallen quiet.
More than 100 lorries usually pass through here each day, carrying 3,000 tonnes of wheat. It is milled, fermented and distilled. The final product is bioethanol, a renewable fuel that is then blended into E10 petrol.
This is a vast operation. It took several years to build, with considerable investment, but it is on the verge of closing down. Management and staff are holding out for a last-minute reprieve from the government but time is running out.
It’s been a turbulent journey. The plant was already being annihilated by US rivals, losing about £3m a month. Vivergo and Ensus, based in Teesside, blamed regulations that enable US companies to earn double subsidies.
They were pushing for regulatory change but then a killer blow: The US-UK trade deal, which allows 1.4 billion litres of American ethanol into the UK tariff-free (down from 19%).
“We’ve effectively given the whole of the UK market to the US producers,” said Ben Hackett, managing director at Vivergo.
“If we were to have the same support that the US industry has, if we could use genetically modified crops, we wouldn’t need that tariff. We would be able to compete. If we had the same energy costs. We wouldn’t need those tariffs.”
The government has the weekend to come up with a plan that could keep the business running. If it fails, Vivergo will begin issuing redundancy notices to its 160 staff.
Ben Hackett
It’s a devastating prospect for workers, many of them live in Hull and are nervous about alternative opportunities in the area.
Mike Walsh, a logistics manager who has been working at the plant for 14 years, said: “It’s not a great place to be at the moment. It’s a very well paid, very high-skilled role and they’ve (Vivergo) given everybody an opportunity in an area that doesn’t pay that well…. The jobs market isn’t as good as what people would like. So it does impact the local economy.”
He called on the government to “help us, save us, give this industry a future”.
His colleague Claire Wood, lead productions engineer, said: “I moved here after a career in oil and gas for 10 years, partly because I want to be part of the transition to renewable fuels. I can see so much potential here and it’s absolutely devastating to know that this place might be closed very, very shortly and that all that potential just goes away.”
Thousands more could be affected. Haulage companies may have to lay off truck drivers and farmers could also suffer a blow.
Vivergo makes bioethanol using wheat. That wheat is bought from farms from Yorkshire and Lincolnshire.
Claire Wood
The National Farmers Union has sounded the alarm, saying: “Biofuels are extremely important for the crops sector, and their domestic demand of up to two million tonnes can be very important to balance supply and demand and to produce up to one million tonnes of animal feed as a by-product.”
Another bioproduct is carbon dioxide. The gas can be captured and used to put the fizz in drinks or injected into packaging to preserve food.
If Vivergo and Ensus were to go, Britain would lose as much as 80% of its output of carbon dioxide. Supplies are already tight across Europe, meaning this decision could compound shortages across a range of sectors, from meat-packing to healthcare.
The industry is calling on the government to help. Vivergo says it needs temporary financial support but that the government must create a regulatory and commercial environment in which it can thrive.
It says rules that award double subsidies to companies that use waste product in their bioethanol must be changed. At present, these rules are being used by US companies that make ethanol from Uldr – a by-product of processing corn. They argue this is not a genuine waste product.
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Another option is to grow the market. Industry leaders are calling on ministers to increase the mandated renewable fuel content in petrol from 10% to 15% and for an expansion into aviation fuels. That would allow British companies to carve out a space.
The government has been locked in talks with the company since June.
It said: “We will continue to take proactive steps to address the long-standing challenges it faces and remain committed to a way forward that protects supply chains, jobs and livelihoods.”
However, the time for talking is almost over.
Mr Hackett said he had no idea how the government would respond but he was firm with his stance, saying: “In times of global uncertainty, losing that energy certainty and supply from the UK is a problem.
“I think what they’re missing out on is the future growth agenda. We’re the foundation on which the green industrial strategy can be built. We make bioethanol that today decarbonises transport. Tomorrow it will decarbonise marine. It will decarbonise aviation.”
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