A new approach to North Sea licensing and reforms of the windfall tax on oil and gas profits are needed to tackle mass job losses in the industry, according to a Labour-led Westminster committee.
The Scottish Affairs Committee has demanded urgent action after warning that the creation of clean energy jobs is being outstripped by the pace of oil and gas job losses.
It highlighted that 5,000 jobs a year are currently being lost across the UK North Sea workforce, and said that without intervention, the decline of the industry will accelerate.
MPs on the cross-party committee argued there are “compelling arguments” for maintaining higher levels of domestic production to reduce reliance on imports and keep skilled supply chain jobs in Scotland.
The report also calls for a more pragmatic approach to North Sea licensing, urging the UK Government to clarify how developers can undertake additional drilling activity under existing exploration licences.
Ahead of next month’s Budget, the committee warns that the downturn in the industry will deepen unless there is urgent reform of the Energy Profits Levy, which it says has created uncertainty and risked driving investment overseas.
It concludes: “Without reform, the current tax regime will accelerate the decline of the North Sea oil and gas industry and its supply chain. Reforms to the temporary tax, initially introduced in 2022, should be implemented as soon as possible to create certainty for the industry.”
Committee chair Patricia Ferguson MP said: “Today's report outlines our concerns that jobs from the clean energy industry are simply not being created fast enough, or on the scale needed, to match the mounting job losses from the oil and gas sector.
“It’s vital that the government moves quickly to plug this employment gap, replace jobs being lost and ensure a smooth energy transition for workers and communities. Until this is tackled, the government should avoid making decisions that would further accelerate oil and gas production’s decline.”
The report also cites the closure of the Grangemouth oil refinery as a failure of transition planning, concluding that both the UK and Scottish Governments “should have acted sooner to prepare for resulting job losses.”
Russell Borthwick, Chief Executive of AGCC, who gave evidence to the committee, said: “This report is a much-needed dose of reality and validates what industry and communities in the North-east have been saying for years.
“The UK Government now faces a clear choice - it can manage our substantial remaining North Sea reserves in a way that protects jobs, skills and energy security, or it can let this national asset collapse faster than the industries that are meant to replace it. One is a transition, the other is a cliff edge.
“Cutting domestic production only increases reliance on imported LNG with four times the carbon footprint. The government must therefore act now to remove the Energy Profits Levy and back a managed transition that keeps investment, tax revenue and talent here in the UK.”