Key energy challenges for UK government

Election of the Conservative government under Prime Minister David Cameron has got cautious approval by the oil and gas business, but everybody recognises there are still serious challenges ahead, writes Brian Davis. Amber Rudd was promoted to Secretary of State for the Department of Energy and Climate Change (DECC), following the defeat of Liberal Democrat Ed Davey, and Andrea Ledsom was named Energy Minister.

Rudd comes with experience as former Parliamentary Under Secretary of State at DECC. She is reputed to be comfortable with green issues ‘so long as it doesn’t upset the local community’ and has spoken of the need for a strong deal at the UN climate summit in Paris in December. According to the Sunday Times, Rudd is to press for a law by mid-2016 to ensure that consent for new wind farms will have to be given by a local council planning authority, which will be duty bound to consult residents. Whereas under current planning rules, large onshore wind farms are handled by a central governmental infrastructure body that can ignore the wishes of local people. Furthermore, no more subsidies will be paid to operators of new onshore wind turbines under legislation in the Queen’s speech.

Rudd is also eager to continue the drive for shale gas developments in the UK ‘so long as they can be delivered in a safe but beneficial way’. She told the Sunday Times that the government would pass secondary legislation that would allow shale gas extraction under national parks, but with no drilling allowed inside areas of outstanding natural beauty.

Ken Cronin, Chief Executive of UKOOG, says: ‘We look forward to working with Rudd and the new Conservative government which, during the coalition, showed commitment to allowing businesses to explore for oil and gas and discover the extent of the resources underneath the UK.’

Deirdre Michie, Chief Executive of Oil & Gas UK, also looks forward to working with the new government to promote and develop a sustainable future for the oil and gas industry, which she emphasised supports some 450,000 jobs and a 35bn supply chain. Michie insists: ‘In order for the UK to thrive in the long term, energy policy needs to be at the heart of economic policy… For our industry stability is very important and, therefore, we also hope to see continuity of office within this new Cabinet.’

Oil & Gas UK also stressed ‘the importance of establishing and maintaining a strong tripartite approach to maximising the economic recovery of oil and gas from the UK Continental Shelf’.

Meanwhile, Luke Gabb, Head of the Energy Sector at law firm Bon Dickinson, believes loss of the Liberal Democrats’ influence will ‘likely result in something of a shake-up for the energy industry’. He cites concerns about onshore wind developments. ‘Onshore wind in England and Wales will face a challenging environment if the manifesto pledge to halt new public subsidy is implemented… although prospects in Scotland remain favourable given the SNP’s overwhelming success’. Gabb maintains: ‘Although shale gas will provoke widespread public opposition, it is likely to receive a significant boost and may well make headway given the manifesto proposal to apply economic benefits locally, particularly with the proposals for a Sovereign Wealth Fund for the North of England.’

Michelle Hubert, CBI Head of Energy and Climate Change, suggests the government mustn’t lose sight of the importance of UKCS development. ‘Oil and gas is, and will, remain a crucial part of our energy mix as we move toward a low-carbon economy. The fall in oil price refocused attention on the North Sea, but the real issue is the growing cost of operating in the basin. We need to ensure that government policy is designed to maximise recovery of the UK’s offshore and onshore reserves.’