Energy Security and Net Zero Committee
Oral evidence: Managing the future of UK oil and gas, HC 231
Wednesday 17 June 2026
Ordered by the House of Commons to be published on 17 June 2026.
Members present: Bill Esterson (Chair); Lizzi Collinge; Torcuil Crichton; Graeme Downie; Wera Hobhouse; Mike Reader; Bradley Thomas; Claire Young.
Questions 1 - 113
Witnesses
I: David Whitehouse, CEO, Offshore Energies UK; Tessa Khan, CEO, Uplift; and Claire Greer, Organiser, Energy, GMB Scotland.
II: Elizabeth de Jong, CEO, Fuels Industry UK; Verity Davidge, Director of Policy and Public Affairs, Make UK; and Mark Simmonds, Director of Policy and External Affairs, British Ports Association.
Written evidence from witnesses:
– Uplift
Witnesses: David Whitehouse, Tessa Khan and Claire Greer.
Q1 Chair: Welcome to this morning’s session of the Energy Security and Net Zero Committee, in our inquiry into managing the future of UK oil and gas. Welcome to our first panel. If you could introduce yourselves, then we will start with the questioning.
Claire Greer: I am Claire Greer. I am a regional organiser for GMB Scotland, and I look after energy and utilities across the country.
Tessa Khan: Good morning, everyone. I am Tessa Khan. I am the executive director of an organisation called Uplift.
David Whitehouse: I am Dave Whitehouse. I am the chief exec of Offshore Energies UK, an organisation that represents 450 companies: those investing in oil and gas, carbon storage, hydrogen and some of our wind developers, and a large number of the UK supply chain.
Q2 Chair: Thank you very much to all of you. We look forward to hearing your evidence. I will start with some questions about the upstream oil and gas industry. Tessa, what lessons do you draw from events in the middle east this year?
Tessa Khan: Thanks so much, Chair. In short, the lesson that we are drawing is that, while it has always been the case that the UK has been very vulnerable to fossil fuel price shocks, which is reflected in the fact that more than half of the UK’s recessions since 1970 have been caused by fossil fuel shocks, it is clear that we are now in a new area of extreme volatility and unpredictability when it comes to oil and gas markets.
Our dependency on fossil fuels is inflicting a huge amount of economic pain and damage on the economy and ordinary people across the country. Even if you look at the state of fuel poverty in this country before the latest energy price crisis, we had 12 million households spending more than 10% of their income on their energy bills, not to mention that it has cost the Government, businesses, and households more than £180 billion just to deal with those price shocks—so, in our view, it is as urgent and as clear as ever that there is a real imperative for us to transition away from fossil fuels.
In that context, the focus on North sea oil and gas as a source of affordable energy—or indeed as a major engine for economic growth—is misconceived. That is because, despite the fact we have had for the better part of the last decade an extremely favourable tax and regulatory environment for the oil and gas industry, jobs supported by that sector have more than halved in that time and we are now dependent on imports to meet our oil and gas demand. That is because the oil and gas base in the North sea is in structural decline. What we now need to do is focus on long overdue support for oil and gas workers, associated supply chains, and communities with ties to that industry.
More licensing is not going to change the reality that the UK continental shelf is now an expensive, mature oil and gas basin. All that continuing to license new production will do is reinforce the complacency we have had as a country for too many years about having oil and gas on our doorstep, which has meant that we have completely failed to plan for this transition. That is to say nothing of the fact that we cannot burn the fossil fuels in existing oil and gas fields globally without blowing past safe climate limits, let alone adding new ones to that stockpile.
What we urgently need is a clear signal to investors, businesses, and households that we are committed to this shift and ready to make the most of the fact that for the first time after one of these fossil fuel price shocks the alternatives are actually ready, available, affordable, and ready to scale. Otherwise, I think we are going to find ourselves back here again when the next oil and gas crisis inevitably hits in the next few years, but under even greater strain and with even less resilience.
Q3 Chair: Thank you. One of the elements of what has gone on in the middle east is the impact on energy security. At the moment, 20% of our energy comes from electricity and 80% from fossil fuels. Isn’t it better to have as much of those fossil fuels coming from domestic sources as possible?
Tessa Khan: The first thing I would point to is that the real concern for households and businesses across this country is energy affordability rather than availability. To that end, more North sea oil and gas production—as the oil and gas industry itself admits, and the Government accept—does not make a difference to the price that we pay for those commodities, which are priced on regional and global markets. When it comes to supply—
Chair: Sorry to interrupt you, Tessa, but my question was about energy security.
Tessa Khan: Yes, indeed.
Q4 Chair: The reliance on imports—I think you admitted it in your first comments—has exposed the reality of just how uncertain our supplies are. It is not just about affordability; it is about security of supply. If we are going to ensure security of supply, aren’t we better to get as much of our supply from a reliable source, which in this case means the North sea?
Tessa Khan: Unfortunately, even when it comes to security of supply, more North sea oil and gas production is not an answer to that challenge as 80% of the oil that we produce in the UK is for export. The majority of what is left, in terms of North sea oil and gas reserves, is oil at this point—about 70% of the reserves that are left. That is not oil that comes directly into UK refineries, businesses or cars; it is exported to global markets. We then have to reimport that in a way that does not put us at an advantage compared with any other consuming country.
When it comes to gas, the reality is that, after 50 years of oil and gas drilling, we have effectively extracted the vast majority of the gas that is economically recoverable. The best way to demonstrate that is that, if you look at all the hundreds of oil and gas licences that were issued under the last Government between 2010 and 2024, in total they have yielded 36 days’ worth of gas demand. That is 14 years of licensing. If you look at the lifetimes of the fields that were licensed in that period, they will only produce six months’ worth of gas demand over their entire lifetime.
If you are worried about our import dependency, if you look at the North Sea Transition Authority’s own figures, new licensing and new field developments will not change the fact that, by 2030, we are going to be dependent on imports to meet two thirds of our gas demand, and 90% dependent by 2050. What is making a real difference to that import dependency right now is, for example, the fact that in March the solar and wind power that we use to generate electricity in this country saved us £1 billion in energy imports or gas imports. That is the real answer to energy security, not looking at diminishing amounts of gas that we can extract and oil that are for a global market.
Q5 Chair: The figure we have from the NSTA, if we just talk about gas, is that 43% of the UK’s gas usage comes from the UK part of the North sea. Do you accept that figure?
Tessa Khan: Yes, absolutely. This is about the question of whether or not we license additional production.
Q6 Chair: If you accept those figures, what do you think is realistically possible from the UK part of the North sea for gas supply in the UK?
Tessa Khan: As I said, again taking the oil and gas regulator’s own figures, with new licences and new developments, we are still looking at a scenario where the UK is dependent on imports to meet two thirds of its gas demand in just five or six years’ time, and that rises to 90%. Therefore, holding out this hope that we can rely on more North sea gas extraction in particular to offset our import dependency simply does not square with reality.
If what you are really looking for is energy security, resilience and independence, more renewable energy—which, as I said, is what has been cutting our gas import bill by billions of pounds in recent months—is what we should be looking to accelerate. We welcome the fact that the Government are taking steps to accelerate the renewable energy deployment.
Q7 Chair: Thank you very much. David, I quoted the 43% NSTA figure and I think you broadly accepted those figures in your last appearance with us. Where do you think we could realistically get to—I saw the article quoting you, which I think came from an OEUK press release—with the UK’s usage of gas if we adopted the approach you are suggesting?
David Whitehouse: Very briefly, in terms of context, what is happening in Iran makes it very clear that we need to be aware of where our energy comes from. I believe that the more self-sufficient we are in our own energy, the more resilient we are as a country, and the better able we are to protect consumers. I think that has been brought into sharp focus.
The gas that we produce in the North sea goes directly into our national grid. It supports 24 million homes around the country. It is going to be a fuel for decades to come. Gas is not used simply for electricity but also fuels our heavy industries and our homes. We need that. Today, we produce 43% of the gas that we use as a country. We are reliant on imports from our friends in Norway, and about 20% of our imports come from LNG from other places around the world.
The North sea still has significant potential. I speak as somebody who has worked in the North sea for 20 years. I speak as somebody who has worked on those fields for over 20 years. I speak as somebody who works alongside those who understand the basin. What we see is that if we choose—and I think we should—as a country to prioritise our own production, we could keep that production of gas broadly flat. If we do that, what that means is that, by 2030, instead of being reliant for over 30% on LNG imports, it could be reduced to single figures, and by 2035 the same argument. We end up in a place where we are—
Q8 Chair: Sorry to stop you as this is very helpful as background. You just made the point that we can keep production flat, which will reduce the amount of imports. You are suggesting we will be using less gas presumably to do that?
David Whitehouse: There are two things you would expect to happen in the coming decades. We will use less gas as we transition to a more electrified economy, but by keeping our production flat, it basically means that we are in a place where we reduce our reliance on LNG imports. If I could, Chair, the value in that—
Q9 Chair: I just want to make sure we have this right. I am sorry to interrupt. We are trying to get the detail right for our report and our recommendations. You see maintaining production or keeping production levels broadly where they are as a key part of the transition. They go side by side. That is what you are proposing.
David Whitehouse: Absolutely. Of course, we can substantiate to the Committee our view as to where those oil and gas volumes come from. It is important that we see the build-out of renewable energy. The UK is importing more energy; 40% of our energy is now imported. It makes you very vulnerable. We think it is right that we build-out renewable energy and other forms of energy, but we should do that alongside support for our own oil and gas production.
It is a national imperative that we prioritise our own gas production. It makes us more secure. It supports communities, like the one where I live in Aberdeen. We support over 184,000 jobs. It comes with a significantly lower carbon footprint than imports, so it is good for the environment, not bad. Importantly, it pays taxes. Because we pay those taxes, it gives the Government, the Treasury, and the country the ability to choose whether or not to support our energy consumers, and whether or not we wish to eradicate fuel poverty. Because we pay taxes, it gives the Government the choice.
Q10 Chair: Thank you. I am going to ask Graeme Downie in a minute to explore what you have been saying about taxes, and to perhaps come back to what Tessa Khan was saying about 12 million households in fuel poverty.
Before I do that, I want to turn to Claire, and what the GMB’s view is about your members and what is needed as we have an energy transition. Where do you, where does the union and where do your members see policy needing to go over the next few years?
Claire Greer: It is a wide-open question about where we see it has to go. If we look today at where we are standing just now, our members do not see a transition that involves them or that includes them, particularly our members who work offshore in the North sea. What they see is that jobs are falling off a cliff edge, there is no transition, and there are no other jobs for them to go to. There is certainly no uptick in positions in renewables at the moment.
We have to go further afield than just the North sea. We have to look at gas distribution across the country as well. At the moment, our gas distribution network is one of the best in the world. It is safe. It is reliable. It is a mass transport of energy across our country. Right now, our members who work in those industries do not see a future when the conversation is around electrification and renewables. They do not see where that includes them, for them to transfer from the jobs they are doing now to other positions that are similar to what they are doing.
If we look at the terms and conditions, if we look at the pay, and if we look at whether these jobs that are being produced through renewables are unionised, we have to say that none of these things are happening just now. When we look at the pay across the board, we see almost a 30% drop in earnings in renewables compared with oil and gas. If we look at terms and conditions, they have been corroded right across the piece. We are currently seeing ongoing consultations that amount to fired and rehired, if you like, which is just to corrode the terms and conditions that they have in the North sea at the moment.
Our members do not feel supported. They do not feel part of this transition. They certainly do not feel that their skills and knowledge are being utilised or transferred over into renewables. We do not see those jobs there. There is a lot of conversation and a lot of talk about them but GMB, from our members and as an organisation, does not recognise this transition just now. It is a difficult place to be.
Chair: Thank you very much for your analysis. I apologise; I should have declared my membership of GMB at the start of the session. I do not apologise for being a member of GMB at all, but I apologise for not declaring the interest.
Claire Greer: Do not apologise.
Q11 Chair: Definitely not. I am very proud to be a member of the GMB. Other colleagues, no doubt, will make their declarations.
What do you think needs to happen to support your members who work in oil and gas over the coming years?
Claire Greer: We need to look at the transition as a whole. It is fractured just now. Everything is running at different paces and at different times, which is not going to work for our members. There need to be jobs for our members to go to from oil and gas, whatever that may be—whether it is in renewables or in electrification. That will only work, as Dave has already alluded to, if there is an energy mix across the country. It is not going to work with one focus on electrification. We need to make sure there are jobs across the piece, right across energy, and oil and gas must be part of that.
Our oil and gas networks are not going to suddenly stop tomorrow. For as long as we still need gas and oil to go through those pipes, particularly for industry and for domestic energy, we will need those networks up and running. We need those people working within them, so it needs to be part of the transition. If oil and gas is not included within that energy mix our members’ jobs will fall off a cliff edge. They will no longer exist. We need to make sure the transition supports that from now on. We cannot just talk about it; it needs to be happening. There need to be firm plans in place.
Q12 Chair: You are talking, Claire, about workers in the North sea and workers in the gas networks.
Claire Greer: Right across the communities across the whole of the UK. We do not need to point them out individually, but if we go looking at places like Methil, Grangemouth, Aberdeen and the north-west of England, these communities survive on energy. It does not have to just be from oil and gas. We can have that energy mix. We can have renewables in there. We can have electrification, but it all needs to be part of the picture. If we only focus on one element of it then we are absolutely decimating a whole industry with years of experience.
David Whitehouse: I am not a unionised member, but it is an industry I have worked in. I have lived in Aberdeen for 20 years. I think it was the IEA that said if you want a just transition it needs to be done with people, not to them. Far too often we are doing things to our industrial communities. The one thing that would be really helpful is to listen more. I welcome the fact that this Committee is going to go to Aberdeen. I commend you for that and I commend you for listening.
When people come and talk to us about just transitions, we are stereotyped that we are arguing for the status quo and we are not. We are better informed I think than most in this country about the need for a transition and a just transition. We are absolutely at the forefront of it. People will come and talk to us about just transitions. We will tell them that, while we continue to use oil and gas, we should prioritise our own production. That is right because it supports our jobs while we go through that transition and we build the other side.
We also say, “Please be mindful of the language you use. Be mindful, when you divide working people into the clean and the dirty, of how that feels for those who work in these communities.” When we talk in dismissive terms about the importance of our oil and gas workers, remember those are real human beings who are working in the sector.
There are solutions. Fundamentally, this transition can be a brilliant opportunity for the UK to be more resilient, more secure and it can create real economic opportunities for communities up and down the country, including where I live, but the request is to please listen to us more. When people write reports, they never write down that we should continue to support those jobs while they are there and we transition. They never write down that we need to be careful about our language. We need to see people listening to us and taking away some of the advice we give.
Chair: Thank you very much. I have taken up quite a lot of time with my opening questions. We will move on to my colleagues. Wera, I know you want to come in but can you hold your question until we come to your set of questions? I will go to Graeme Downie next, please.
Q13 Graeme Downie: Thank you, Chair. I am also a member of GMB.
David, let me pick up on some of the issues you talked about earlier around opportunities and investment. You are in the press today talking about the oil and gas price mechanism, which could raise a significant amount of funding. Is that something you are looking for because it is a lower tax rate than the EPL?
David Whitehouse: It is not actually. It is something we have been engaged on with Treasury probably for decades but certainly in the last year. Fundamentally, when oil and gas prices spike it causes real problems for consumers. The reality is we have been looking for a mechanism that gives those who are investing in oil and gas certainty to invest, but that recognises that when prices go up there should be a tax paid.
We have had the energy profits levy in place now for four years. It is poorly designed and it is driving away investment. The reason we call for that oil and gas price mechanism is that it is a mechanism designed by the Treasury. Fundamentally, what it means is when prices go high, as they have been in recent months, oil and gas producers will pay additional tax—75% tax in total—on excess revenue, but when prices are lower it stimulates investment. You get the best of both worlds. You get the investment we need. You get the oil and gas that I think we need as part of our security and jobs. We can also use the funds to protect consumers.
Q14 Graeme Downie: What assumptions are the figures that you have put out this morning based on? If this is something that is in some ways a higher tax, what are the assumptions that say it will raise the funds that you are suggesting it will?
David Whitehouse: If you have more activity and more investment, fundamentally there is a bigger pie and because of that bigger pie you get more tax. What we say is that, as we sit today, as an industry we have identified 110 projects, many of which are associated with our existing fields, around existing infrastructure. That is £50 billion of investment that will produce in excess of three billion barrels of oil and gas, which will help to meet at least half of our demand. In doing so, Graeme, three billion barrels adds about £150 billion worth of value to the economy, and it comes with tax revenue. We speak about those tax revenues, and the revenues associated with the jobs that are protected.
Q15 Graeme Downie: How certain are you that investment will follow a change to an oil and gas price mechanism?
David Whitehouse: I don’t want to speak directly for the operators, but we have had this conversation on a number of occasions and prior to the start of the war in Iran. The reality is I think people see that those are opportunities that they wish to pursue. If we can put the oil and gas price mechanism in, I am very confident we will see that uplift in activity, but it would have to come with other things. In reality, we would need a regulatory regime that is supportive of that, which would unlock it. I would be confident it would come. The most important thing is having a country and a Government that say, “We use oil and gas. We should prioritise our own production.” That is key.
Q16 Graeme Downie: I will move on to Tessa in a second. There was a suggestion in the Energy Security Bill and the King’s Speech of a legislative ban on licensing—new licensing beyond what is included in the Labour party’s manifesto. Can you reflect on what effect that might have, if any, on investment?
David Whitehouse: What we will have in the Energy Independence Bill is the Government will look to introduce transitional energy certificates, which provide some access to areas around existing infrastructure. As to the outright ban on production, the reality is the majority of the oil and gas we produce is going to come from our existing fields and existing licensing areas. We should be clear on that, but there are still significant opportunities around the North sea for additional oil and gas that would come from access to new licences. By banning that we are cutting off that opportunity and, to some degree, we are sending a conflicting message that says we are not seeking to prioritise our own production.
My own view is that, of course, we should continue to produce our own oil and gas and that it is appropriate with the right checks and balances in place that we continue explore. The UK is leading the way with our environmental assessment activity, looking at not just scope 1, 2 and 3 emissions. I think it would be an important message for the country in volatile times that we are going to prioritise our own production and our own jobs.
Q17 Graeme Downie: Tessa, Norway continues to extract oil and gas for export and has very high renewables. It uses the tax profits to fund a social model that I would certainly like to see in the UK. Is that something the UK could or should pursue as well, based on what David just mentioned about the possibility of increased investment?
Tessa Khan: Could I come to Norway in just a moment?
Graeme Downie: I am short of time; I can feel the Chair’s energy telling me to—
Tessa Khan: Sure—I will start with Norway. The comparison between Norway and the UK is one that we hear a lot, but we think is one that is not particularly useful. The Norwegian continental shelf is less mature. It has larger remaining reserves and newer high-quality fields, including a whole new drilling frontier which is the Arctic.
More importantly, the Norwegian state has been actively involved in the development of those resources from the very beginning, in contrast to a market-led approach to production and development in the UK. Look at, for example, Norway’s tax regime, which has an effective tax rate that is higher than the UK’s when you take into account the fact that the Norwegian Government are the majority owner of the biggest Norwegian oil company, so they have a direct working share in oil and gas production in Norway, unlike the UK Government. Until the energy profits levy was introduced in 2022, the UK Government’s take per barrel of oil was significantly lower than that in Norway, so we think the Norwegian approach has been completely different, which is why they have managed to build a trillion-dollar sovereign wealth fund. That opportunity has come and gone for the UK. Those days are past.
We heard from David this morning, and from the oil and gas industry in the past, that they will give us increased production if we provide lower tax rates or they are making sufficient profits. What we saw with the last energy price crisis in 2022 was the oil and gas sector making historic profits—£32 billion in post-tax profits. Those profits were not reinvested in the UK; they were used to return cash to shareholders and invested elsewhere.
Q18 Graeme Downie: Due to the EPL, more of that tax was allowed to stay in the UK and could then be spent. Is that not a social good for the UK?
Tessa Khan: Absolutely, but rather than the best of both worlds, which is how David would put it, I would say the two scenarios we have are the worst of both worlds. Either you have extremely high oil and gas prices, which cost the UK economy £180 billion—the EPL contributes a very small amount to offsetting that enormous bill, which is being footed by ordinary people across the UK—or you have lower prices, as we did pre 2022, before the windfall tax was introduced, and then we revert to having some of the lowest headline oil and gas taxation rates in the world, which was the case. That is why companies like Shell have paid a negative amount of tax in the UK multiple times in the last decade. We have significant decommissioning relief, significant capital and investment allowances, and so—
Graeme Downie: My other colleagues have questions on decommissioning coming up.
Tessa Khan: The point that I wanted to make is that, if you look at the OBR’s projections before this latest energy price spike for what the UK’s oil and gas sector would yield in terms of tax take for the Exchequer, in 2030 it is £0.1 billion in tax. That is, in terms of the Government’s annual budget, a rounding error. The idea that this is an industry that will contribute huge amounts in tax will happen only when you have incredibly high energy prices, in which case the economic pain is not coming anywhere close to being offset by that tax.
Q19 Graeme Downie: I am about to run out of time. Claire, what is your view of signals that the Government could send or would be sending by either moving to the OGPM or not, or by legislating for a licensing ban or not? Would you have any concerns for you and your workers about the signals that might send?
Claire Greer: First and foremost, for the workers and for the members, the signals that have been sent so far are unclear. They do not see a clear plan; they do not recognise a clear route ahead at the moment. The Government making changes again along this route to transition, if I have to be honest, I don’t think would be any more confusing for our members than it has already been.
I have been fortunate enough to have visited North sea platforms. I have stood on them beside our members, and they are very unaware of what is happening. When we talk about transition, the only thing that they hear is this rush to net zero, but if you were to sit down and discuss what that looks like for them and what the plans are, no, I don’t think that people would be confused, because I don’t think that they are aware of what is going on just now. I do not think that they recognise the plan as it is just now. They can only see this target.
Q20 Graeme Downie: What would be needed in order to give them some vision of what the plan is?
Claire Greer: There has to be a clear plan, first of all. The plan has to exist, it has to come to fruition, it has to have targets, and there have to be points where we will meet targets and things can be marked off to say, “This is what we have achieved. This is what we have not achieved.” At the moment, none of that is there. It is all about getting to net zero and it seems to be at the expense of all these people who work in the North sea. That is our concern.
Our concern is about jobs; it is about infrastructure. We spoke about it. It is about energy security, and it is about making sure that the UK is self-sufficient in its own energy moving forward. To do that, we need to make sure that the people who work on the North sea and people who work in gas distribution and energy in the UK are part of that plan and understand what is happening. The confusion just now is because they do not understand; it is not about what changes have been put in place.
Q21 Chair: David, in the press release that OEUK issued, you were quoted as saying that your analysis shows that “a stable North Sea tax regime coupled with supportive policy could generate enough additional tax revenue to eliminate fuel poverty altogether.” Twelve million households are in what is defined as fuel poverty. How could £10 billion, which is the figure that you are estimating over 10 years, eliminate fuel poverty? How quickly would we get to that point?
David Whitehouse: Fundamentally, the argument that we make there is showing that if you support UK industry rather than imports, you get tax. You get tax from people’s wages, you get tax from what we produce, and it gives you choices. We are simply saying that one of the choices the Government could lean into is eradicating fuel poverty. There are 2.4 million people in fuel poverty in the UK.
Chair: You are using a baseline of 2.4 million, when the definition is 12 million.
David Whitehouse: Sorry—2.4 million, and we will follow up with that data. If you look at those who are paying more than 10% of their piece, that is not the definition of fuel poverty. Those who are in fuel poverty are 2.4 million in England. Extrapolate that to the wider UK and that is about 3 million people. The Government’s own statistics say that on average those people need somewhere in the region of £380 per annum to address that fuel poverty. When you look at that and you look at the tax revenue that we have, that is sufficient to eliminate fuel poverty in the United Kingdom. Because we produce oil and gas ourselves, the Government and the Chancellor will have the choice as to whether or not to do that. That is the value of producing your own energy, and that is the value of supporting your own industries.
Q22 Chair: Assuming your figures are right, and thank you for clarifying them, how quickly would that happen?
David Whitehouse: I think it is something that you would see quickly. If we got ourselves in a place where we have a Government—and more than just a Government; I would expect a Parliament, in the world that we are in—saying that we should be supporting UK industry and prioritising our production over imports, I think you would see that investment flow quickly. It would start to generate that revenue quickly and, importantly, it would give confidence to those in work that their jobs are valued and what they do is valued. You would see it quickly and the opportunity would be to see fuel poverty eliminated, if that is what the Chancellor chose.
Q23 Chair: I am tempted to ask you how quickly, but rather than that, if you have already said your plan is to see production broadly flat, where does the extra activity come from? What you have proposed previously is that the new activity replaces the otherwise declining activity. How does this produce enough activity to generate all these extra revenues? That is the key question.
David Whitehouse: Again it comes back to this issue that there are still significant opportunities in our North sea. There are significant volumes of oil and gas.
Chair: Sure, but all you are proposing is to maintain existing levels of production, not to see an increase overall. Where does that generate extra revenue?
David Whitehouse: Because, Chair, what you see is that inevitably in an oil and gas field, they decline. If you do nothing, we will have exactly what Tessa says: we will exit this decade 80% reliant on imports of our gas, in an incredibly vulnerable place. Tessa is correct that if we continue on the path that we are on, we will exit this decade with very little tax revenue from the sector, because fields decline. By investing in our fields, you add that additional production, you keep production flat, you pay significantly more tax, and you reduce that reliance on imports.
Chair: Reduction at effectively the same level will generate the extra tax. That is the question that I am trying to get to. That is what you are saying.
David Whitehouse: Fundamentally, yes, because if you look at forecasts at the moment, they do not.
Q24 Chair: Thanks. That was all I was trying to get to. Tessa, I will give you the chance to respond to what you have heard before we move on.
Tessa Khan: As I said, we have heard these promises of increased investment in production from the oil and gas industry before. The opportunity surely was when they made record profits in 2022 and 2023—genuinely unprecedented historic profits. As one oil and gas worker put it, the industry chose to, “Lay us off while you pay your shareholders billions and give yourselves massive bonuses”.
We did not see increased investment in production at that time. The priority was shareholders and paying off debt and investment elsewhere in the world. The reality is that the oil and gas industry has always asked for lower tax rates to incentivise new production. When it had some of the most favourable tax rates in the world after the tax regime was changed in 2015, we have had a regulator that has had a principal objective—the NSTA—of maximising economic recovery of offshore oil and gas.
We are going out of our way as a country to maximise and support oil and gas production, yet we have still seen half the jobs supported by that sector disappear. While you are worried about the broader economic effects of the oil and gas sector and the change that could happen, it is clear that lower tax rates will not be an answer to the jobs questions and Claire’s members’ concerns about their future.
The thing that has not been mentioned so far is that it is true that until, I would say, last year, we have not had a plan for transitioning the oil and gas sector, the supply chains, the workforce, and the communities that have ties to that sector. In the last six months alone, there are signs that this Government are grasping this challenge for the first time. They have published a North Sea Future Plan. They have set up a North Sea Future Board that has a specific focus on a supply chain workstream that is due to publish its plan in the coming months. There is a North sea jobs service that is in the works that is designed to support people to transition into new industries, and we finally have mechanisms like the clean industry bonus to attract investment in domestic manufacturing and supply chains for the offshore wind sector in the UK.
The Government project that just the investment that was created by the latest auction round results in January this year will create 7,000 additional jobs in the offshore wind supply chain in the next few years. I absolutely agree with the concern about the reality that the plan has not been forthcoming. I think there are signs that that is turning around and that is where the economic prospects for communities in the north-east of Scotland lie, rather than diminishing returns from an incredibly generous tax regime and regulatory environment for an industry that, as David acknowledges, the oil and gas regulator itself projects will make a minimal contribution to the Exchequer’s coffers by 2030.
David Whitehouse: Chair, I would like to respond to a couple of those comments, and I will be very brief. I make these arguments not about tax; I make these arguments because I think it is right for the United Kingdom and right for places like where I live. That is why we make these arguments. It is not just about tax; it is about the UK’s industrial future. We talk about our plan for our workers, and there are elements of the North Sea Future Plan that I welcome and are good, but we still have this fundamental issue that we need to treat our workforce with respect. We sit in a country where we are prepared to import refined products, diesel, and jet fuel, from Russian crude oil, yet we are unable to say that we prioritise our own oil and gas from our own country. Imagine how that feels if you are working in the North sea today.
Chair: Thank you. I will remind my colleagues that we are all going way over time and we have another panel.
Mike Reader: We remind you too, Chair.
Chair: Okay—Mike Reader is now not asking questions in this session. [Laughter.]
Q25 Lizzi Collinge: I will be very brief, Chair. Thank you, David, for your comments about the importance of workers and looking after them. Would you be willing to share with the Committee the calculations and assumptions that underpin your proposal for a different mechanism?
David Whitehouse: Yes, 100%.
Q26 Mike Reader: I will come on to climate and the environment, but let me pick up on the comments on workforce. Two thirds of the workforce in the North sea say that their employers are not doing enough to support them; 89% say that they want the Government to step in to force oil and gas companies to do more on energy transition and support for workers. David, why do you think that the vast majority of workers do not feel that oil and gas companies are doing enough to support a just transition?
David Whitehouse: From my engagement with our workforce and the people I have worked with for 20-odd years, they do not feel that they are being listened to at all. It is part of that. We live in an environment where their jobs are declared as the dirty jobs, not the clean jobs. We are not listening to our own industrial workers and, to be honest, that is what is causing a degree of resentment.
Q27 Mike Reader: Why are your members not listening to their workers?
David Whitehouse: In part it is the environment that is being created in the country at the moment. We are choosing language that is othering many of our workers. That is language that we as a society are choosing and the Government are choosing to use. That is not a good backdrop.
We meet with our workforce representatives on a very frequent basis. There is significant frustration about the language, and people are starting to question if it is the right path to be on to decarbonise our society. That is the wrong path; we should be able to decarbonise our society, give people high-quality jobs and grow the economy. If we are not careful, the language that we are using is turning off our workers.
Q28 Mike Reader: The Government’s North Sea Future Plan commits to taking a global standard of 1.5°. Are your members committed to keeping warming below 1.5°?
David Whitehouse: Absolutely they are. As an industry, we were one of the first sectors in the UK to sign up to emission reductions targets consistent with the UK’s climate goals of net zero by 2050. The industry is already in progress, and we have reduced our emissions. Effectively, the emissions from our production offshore have been reduced from 2018 by 34% already.
I don’t think that there is another industry that has such performance in that time period. Absolutely people are committed to it. We are not arguing for the status quo. We all recognise that our energy mix has to change. We are simply saying let’s do it in a way where we back UK industries and we back our own workforce, rather than prioritising imports from overseas.
Q29 Mike Reader: Thank you. Tessa, on the assumptions that we have heard today, that we continue production at the same levels, which would include, therefore, more exploration and more drilling, is the 1.5° target that the Government has set achievable?
Tessa Khan: No, it absolutely is not, and the science is very robust about this. It is clear that if we were to burn the oil and gas in reserves—fields that are already operating or that are under development—we would blow way past that 1.5° target. As I said, if you add into that the coal that exists in mines that are either operating or under development globally, you get very close to exhausting the 2° carbon budget. That is the upper limit of what the Government accept they can aim for.
That is an internationally binding target, but it is also one that is important for the communities and businesses across the UK that are already suffering significantly because of the impacts of climate change. I point to the fact that, for example, British farmers lost £800 million in productivity because of record-breaking heat and drought last year, in 2025. The climate impacts are real and there absolutely is no room for new oil and gas developments in a world in which we stay within 1.5°. That is something that the International Energy Agency, the Intergovernmental Panel on Climate Change and countless peer-reviewed reports have confirmed.
I would add to David’s observations about whether or not the oil and gas industry itself is 1.5° aligned, that we have seen in the last couple of years, as oil and gas profits have soared, companies like BP, Shell, and Equinor just this week rolling back on their renewable energy targets. If you look at the 87-odd offshore oil and gas companies operating in the UK, only seven of those have any plans to invest in renewable energy between now and 2030.
This is not an industry that is looking to transition to reduce its emissions in terms of the products that it puts on the market, and that is overwhelmingly where the emissions from the oil and gas industry come from. It is an industry that is doubling down on oil and gas and leaving it to renewable energy investors to drive that transition forward. We need to be very clear that continuing to develop new oil and gas fields and leaving it in the hands of the oil and gas industry is simply not compatible on any reading with our climate targets or with the experience of a safe climate in this country and across the world.
Q30 Mike Reader: Thank you. Tessa, some countries that have committed to ending new oil and gas production, like Denmark, have not immediately halted fossil fuel production. Would it benefit or hinder the UK’s climate objectives to favour domestic fuels over imported fuels?
Tessa Khan: The first thing to say is that the UK exports more than 80% of the oil that it produces. It is very convenient to keep the conversation around whether or not what we produce domestically reduces our import dependency, but our refineries cannot handle most of what is produced in the UK. These are fields and reserves that are owned by private companies that time and again have shown that they will sell their product regionally or globally to wherever they can get the best price for it.
To that extent, keeping the focus on the extent to which domestic gas production reduces LNG imports is a very misleading and marginal view of the full picture. If you look at oil production, for example, the UK’s oil production is not especially clean compared with global standards. We still allow practices in the UK North sea like flaring, which a country like Norway outlawed decades ago, and the oil and gas industry has resisted bringing forward targets to reduce flaring on offshore platforms.
The oil and gas industry, when left to its own devices under the North sea transition deal, in the absence of binding mandatory targets for emissions reduction, itself has admitted that it is not on track to meet its 2040 or 2050 emissions reduction targets. The reality is that if you are serious about your climate commitments—the thing about climate action is that every country in the world needs to show that it is doing what it can domestically to create international co-operation, which is ultimately what this challenge requires.
Q31 Mike Reader: Following the 2025 review, do you expect to the North Sea Transition Authority’s focus on net zero on a statutory basis to make any difference in practice?
Tessa Khan: It will certainly be an improvement on the current situation, which is that the North Sea Transition Authority has a single principal objective, which is to maximise economic recovery of offshore oil and gas, in terms of what is on a statutory footing. That is not fit for purpose in 2026, when I think, as the Government rightly recognise, the future of the North sea basin has to be balanced between a managed transition, what works for the workforce and for supply chains and communities and our climate targets—given the fact that combusting oil and gas is overwhelmingly what is driving climate change—as well as the question of the economics of the basin. We would welcome rebalancing the objectives of the North Sea Transition Authority, and we look forward to the way that the Energy Independence Bill goes about doing that.
Q32 Wera Hobhouse: I am on a timer now to make sure that we stay within time. Before I come to decommissioning, Claire, you mentioned workers do not feel supported in the transition. Who do they blame for that? Is that the employers who do not support them, or is it the Government that do not set up the direction? We have heard about the plan. I understand that if you work in the oil and gas industry, you do not want to be called a dirty industry and so on, but at the same time we hear time and again that lots of skills are transferable skills, so they could be employed in new green technologies. Who do they blame that that does not happen?
Claire Greer: It is a mixed response. They blame employers, they absolutely blame the Government, and they blame the media. There is a wide response on it. David has touched on it already. It is about the language that is been used publicly about their jobs and around their jobs. We do need to be careful with that.
As I have said before, we have stood beside these members who work in the North sea, and they do not feel supported in any area. They do not see anybody coming in to support them. You mention transferable skills. Absolutely—the skills that these people have, they have worked hard for. It is through years of experience, and they understand their industry inside out, but the jobs in renewables are not there. They do not exist for the number of people who are losing their jobs in the North sea.
Q33 Wera Hobhouse: Would unionising the renewables sector make a difference? You said the oil and gas industry has big unions, but for the—
Claire Greer: Of course it would. If an industry is unionised, then it is proven that it has better pay and better terms and conditions. The workplaces are organised and the health and safety standards in there are far better than they are if it is non-unionised. However, we have a real brick wall up in front of the trade unions when it comes to renewables. The majority of renewables do not want us to infringe within that, and that includes some of our biggest employers in the UK, like ScottishPower. These companies have to be held accountable for this.
Q34 Wera Hobhouse: That would make a big difference. Thank you.
David, how might decommissioning be arranged so that taxpayers do not lose the jobs? By the way, there are jobs in decommissioning, aren’t there?
David Whitehouse: There are indeed. As a sector, we are spending in excess of £2 billion a year on decommissioning. I am sorry—what was the question?
Wera Hobhouse: How could decommissioning be arranged so that the taxpayer does not pick up the bill? What I am getting at is that decommissioning can be set off against profits that the company makes, but what stops companies from walking away at the point where they do not make the profits any more, and leave the decommissioning to the taxpayer?
David Whitehouse: The way decommissioning works is that in principle we have a contract for the companies that says that we produce our oil and gas, and we make profits during that period—or in the last couple of years, perhaps not. Then, when we come to decommissioning, that decommissioning expense can be offset against those profits. That is the way the system works. We pay profits, we pay tax and then we get a degree of tax relief from the decommissioning.
How is the UK protected from people just walking away? We have robust agreements in place for every owner, basically, of all our fields. One is that you are unable to walk away because you have to have security in place that stops that happening, so companies in the UK will not renege on their decommissioning obligations and there is security in place to ensure that happens, and others will step in, so there will be no risk there.
Fundamentally, decommissioning of our assets is part of our licence to operate. It is our national obligation to decommission responsibly what we have put in place. Where we can all work together is making sure that that is done in a managed way—one that delivers on our environmental obligations, but delivers in a way where it is done most efficiently, supporting the most jobs and maximising the use of our supply chain. That requires it to be done in a managed way rather than in a chaotic way, which may come from an accelerated decline of the basin.
Q35 Wera Hobhouse: I am still interested in decommissioning particularly. Tessa, there was a firm last year that collapsed. Are we at risk of placing unrealistic expectations on private operators with these obligations?
Tessa Khan: There is certainly no reason we should not expect an oil and gas company to be responsible for the costs and the operation of dismantling the infrastructure that they have profited from building, and rehabilitating the environment that they have been operating in. That is a very reasonable expectation of any industry, and that applies to the oil and gas industry.
As David also recognises, the decommissioning industry is a huge opportunity for oil and gas workers. It could provide a critical skills bridge for people who work in that industry. A recent report found that decommissioning could deliver approximately 11,000 full-time jobs, direct jobs, and a similar number of indirect jobs, but at the moment we have significant delays in decommissioning. We have 500-plus wells that are currently overdue for decommissioning.
The NSTA, which is the body that is supposed to tackle decommissioning delays, does not have the enforcement powers that are needed to stop—for example, even though David speaks about operators being required to provide financial security, there have been recent instances of litigation where operators are trying to pass the buck between themselves in British courts to slow down this question of who is ultimately liable, and to deflect that liability where they can. The system is not working and the fact that there is so much delay in the system already shows that there is a need for reform.
Q36 Wera Hobhouse: I want to have time to go back to David, but before I do, Claire, do you agree that decommissioning roles can bridge the job security to the green economy? Just very quickly—yes or no.
Claire Greer: Absolutely. If there are jobs there that people can go to, obviously it will bridge it. The problem is whether it is working. Cesscon, which you referred to—the company that collapsed—collapsed without any notice to our members who work for it. They received a four-paragraph letter from the company owner, and they could not even be bothered to check their spelling in the letter that they sent out to them. It basically told them that doors were closed—“Contact the Government to see how you’re going to get your pay.” That is not responsible. That is not the work of a responsible employer. It certainly does not appear to be the answer to a bridge for a transition. Certainly it has to be part of it, but it is not the complete answer.
Q37 Wera Hobhouse: Sorry that I am rushing you. I want to have a very quick response from David. Why the delays in decommissioning?
David Whitehouse: We are spending a record amount of money in decommissioning in the North sea, and you will see significant activity again in the coming years. We are spending over £2 billion a year, and you will see that grow. We should be proud of our decommissioning expertise, not just here in the North sea; it is respected around the world. It is again a success story for our North sea.
Is it a transition job? The reality is that once it is done, it is done, but nevertheless it is expertise that is important. We will spend somewhere between £2 billion and £3 billion a year on decom, supporting jobs. Historically, we are spending between £10 billion and £15 billion on operating costs and capital investment in oil and gas. [Interruption.] Absolutely it can help a small number of important skilled people, but it is not the solution.
Wera Hobhouse: Thank you. That was my timer.
Q38 Claire Young: David, I would like to talk about carbon repurposing for carbon capture, usage, and storage, but first can I go back to your earlier answer? When you were asked why the employees do not feel supported by the operators, you deflected with an answer about, “We are telling them that their jobs are dirty.” I do not think that you meant “we” in that, did you, because presumably your operators are not telling their own employees that their jobs are dirty? Could you supply us with some written evidence afterwards about how employers are supporting their employees through this? I do not know if Claire has any evidence more specifically on why they do not feel supported, but that would be helpful.
Turning to the question of carbon capture and storage, one of the things being looked at for the North sea is repurposing existing infrastructure for that purpose. Does it make economic sense for operators at the moment, as obviously it is more expensive than just straight decommissioning? If not, do operators need tax incentives? If they get tax incentives, does that weaken the fiscal case for new oil and gas licences?
David Whitehouse: Yes, we will come back, laying out what we see as the interface between our operators and the workforce. On repurposing fields and equipment for carbon capture and storage, it is a fundamental part of what we need to do, and we are seeing that in some of our track 1 and track 2 projects. It is the cheapest—sorry, it is the least expensive way of delivering elements of carbon capture and storage. Can I come back to you in writing with more specific thoughts around the taxes? There are some complications with the decommissioning liability that sits with that equipment and how that is then passed on through carbon capture and storage. Can I come back to you in writing and clarify that?
Q39 Claire Young: That will be fine. Claire, are you confident the envisaged jobs and careers in repurposing will match existing ones in oil and gas in pay conditions and duration?
Claire Greer: The response to this is almost an answer of two halves. If we look directly at the North sea, the concern there is that the jobs that are currently in the North sea will not be there. If we look at where we are now and where we were last year, at this point last year we had sat in 11 consultations for redundancies across the North sea. At this same point this year, we have now sat in 28. That has more than doubled. Lots of the jobs that were within the North sea last year are no longer there. Our concern is that even if there was repurposing going on in the North sea, people would be taken on ad hoc contracts with fewer terms and conditions because they are not still under the employment that they were previously.
If we look at it further down the supply chain and we look at repurposing across gas distribution networks, absolutely the gas distribution networks that are up and running now are more than capable of repurposing. They are more than capable of moving from perhaps gas to biomethane or gas to hydrogen, whatever it may be at that point. The capability is there, the companies that look after those gas distributions are willing to enter into that as they are just now, the skillset is there, and the experience is there. So it is a story of two halves, and the concern is predominantly what would happen in the North sea.
Q40 Claire Young: In the North sea you are saying the problem is that the jobs will have already gone, so you are not moving straight to having those carbon capture-related jobs.
Claire Greer: Yes. We need it to have already happened, and we need it to be happening now, because thousands of jobs per month are going in the North sea. For every redundancy that we carry out for an individual for the trade union, we estimate that behind that one person who has been made redundant, another two people who have either been ad hoc workers, not on permanent roles, or have not been there long enough to be covered by redundancy consultations, are also losing their job.
Although we are seeing the figures through redundancy, we have to look at the whole picture, and a huge amount of jobs are going weekly and monthly within the North sea just now. If we do not put something in place immediately to stop that, then when we replace those jobs, even in the future for repurposing, will we get them back on the same terms and conditions? Will we get them back on the same pay that they are on? We hope so, but that is another battle that our workers in the North sea will have to face.
As Dave said earlier, this is people’s lives; it is people’s livelihoods. It is not just numbers on a piece of paper or on a spreadsheet that we are looking at. We have to look at how this is affecting the communities, the workers and their families. The whole country will always know somebody who works within energy, particularly in the North sea.
Q41 Claire Young: Tessa, given the Climate Change Committee said that they cannot see a route to net zero without CCS, are you confident that the technology actually works in storing carbon long term and that the UK is well placed to pursue it?
Tessa Khan: The technology has been shown to work. The question is whether it is commercial to operate at the scale that is forecast in those scenarios. That is why the industry has relied on significant subsidies from the Government to get its initial pipeline off the ground, because the economics are what is challenging. In the context of North sea oil and gas assets, as we know, there are 280, roughly, active oil and gas platforms in the North sea at the moment.
At most, even if you accept that CCUS will be a technology that we can scale that does become commercial, you will only need a dozen or so projects, so the vast majority of North sea oil and gas assets will still require decommissioning, which is why a conversation about how we make sure that we have a thriving decommissioning industry is the more important one if what you are looking at is a bridge for oil and gas workers.
Q42 Claire Young: Why do you say only a dozen? We have figures here of 78 billion tonnes of theoretical storage capacity. Could we not become an international storage service?
Tessa Khan: Theoretically. We have been talking in hypotheticals and theoretical scenarios when it comes to CCUS development for years now. If there is a jobs crisis now, there has been a jobs crisis for years unfolding in the north-east. Forecasting what a technology that at the moment is unproven at commercial scale can deliver and putting all your eggs in that basket is a mistake when we have alternatives, whether that is decommissioning, renewables, electricity networks or advanced manufacturing. The sectors that are likely to deliver, and already are delivering, alternative jobs for people in that sector should be where the Government’s focus is.
Q43 Claire Young: Do you not accept, as the Climate Change Committee says, that we need CCS?
Tessa Khan: No, I do. I accept the Climate Change Committee’s scenarios. Absolutely. I am just questioning, if the concern is jobs and investment in the short term, the extent to which CCS is a pathway that will deliver.
Q44 Chair: Tessa, the Canadian oil and gas industry has been using CCUS for many years, commercially successfully. Is there any reason we should not?
Tessa Khan: It has mostly been using it commercially to enhance oil and gas extraction rather than as a permanent storage solution, but the amounts globally are a tiny fraction of the overall carbon emitted. I am not against the industry trying to scale these solutions, as we have heard the Climate Change Committee and other climate modellers forecast. Especially on the trajectory that we are currently on, we will need to capture carbon. It is a question of whether or not in the short term, when we have real political economy and short-term industrial development challenges, that is where we should be spending our public investment.
Q45 Torcuil Crichton: I declare my membership of GMB as well, which is just as well because jobs and the just transitions are at the centre of this. Tessa, I hear what you say about there being no room for new oil and gas developments if we are to stay within the 1.5° target. The bottom line people will hear out of that is that you are willing to sacrifice 240,000 workers in the North sea to stay within global limits that other countries are not staying within. Is that true?
Tessa Khan: If you are talking about the significant job losses, and jobs supported by the sector having halved, that long predates any discussion of an end to new exploration licensing.
Q46 Torcuil Crichton: I know that, but you would let the rest go tomorrow, wouldn’t you?
Tessa Khan: No, absolutely not. We are, as I have said, incredibly concerned with making sure that we are scaling up the alternative industries that workers who themselves, when surveyed, have said—
Q47 Torcuil Crichton: Why can’t we do both? Why can’t we maximise renewables and maximise extraction of oil and gas?
Tessa Khan: For a couple of reasons. From a climate perspective the problem is fossil fuels. If that is the imperative that you are responding to, and it is one that I think this Government rightly take very seriously, given the significant economic impacts of climate change across this country already, there is no room for new fossil fuel developments. In terms of choosing the energy system that we have, choosing where we put our public investment, and choosing to put £250 million into attracting more investment into domestic manufacturing for offshore wind, there are choices that the Government have to make as to where they put their investment and their political capital.
Q48 Torcuil Crichton: Time is short, Tessa, so I have to move on to other people. David, your evidence is very strong, but conflates two things—the oil and gas sector, and that makes billions of pounds for multinationals, which you are a part of, and the community and the workforce, and I have colleagues who go out to do that work. To pick up on Claire’s point, we would like to hear a lot more about what the industry itself is doing to support the workforce. If you could give us written evidence, that would be great. On continuing the North sea and this proposal to not have any more new licensing, tell us about tiebacks and how that would continue to keep the workforce in the North sea for the next 20, 30 years?
David Whitehouse: On conflation, in reality the North sea has not been a big profit basin for a long time, and often we hear profits from multinational companies that are simply not made here. Tiebacks are potentially a helpful concession. Fundamentally, they allow previously discovered fields around existing infrastructure to be brought through existing infrastructure that helps preserve the longevity of those platforms. We wait to see the detail of what that means, through the Energy Independence Bill and subsequent guidance. We will continue to make the argument that if you have access to explore and you do it in a responsible manner, that is better and that prioritises UK production and ensures that we minimise our imports. I believe that that is the right thing to do.
Q49 Torcuil Crichton: A helpful concession? Surely it is a major concession. Something like 2.5 billion more barrels would come out of the North sea with tiebacks, wouldn’t it?
David Whitehouse: That is not a number that I would recognise. We are working through the detail on what we see as the opportunity for tiebacks. You are right to say that there are billions of barrels on unlicensed, discovered fields, but only a relatively small proportion of those will be turned into oil and gas production, and we would be happy to come back with some data on that.
You made the point about maximising oil and gas and renewables. The position that we take is that we should maximise our domestic production to meet our own demand. That is what we are talking about, and we should do that alongside oil and gas. Absolutely we should be committed to hitting the 1.5° target. That is what the Climate Change Committee has set out. The things that we talk about are within that and we would be happy to discuss it. There is a genuine issue. When the IEA spoke a number of years ago about no new fields, fundamentally about 50% of the reserves in the world are in countries that are currently embargoed, such as Russia and Iran. Again, it is this issue, if you are working in the North sea today, that you will lose your job and we are prioritising operations in other countries.
Q50 Torcuil Crichton: Claire, this directly affects all your members. Thanks for highlighting the gas network. We talk about offshore jobs and of course there are thousands of onshore jobs as well in that gas network, the future of which we do not know, but there is a potential future in nuclear. Are these transferable skills that could go to nuclear if Scotland adopted nuclear power?
Claire Greer: Yes, 100%. If there was a policy or a plan in place that allowed new nuclear within Scotland, absolutely. That is the supply chain for nuclear as well as the power stations, so we are looking at the companies who generate the components and manufacture the individual appliances that they need within the nuclear sites as well.
Torcuil Crichton: Same kind of job, same kind of skills, same kind of supply chain?
Claire Greer: Absolutely. We did do a bit of investigation on our members who have left the North sea, to see where they are going to work. The thought process was that they were going to work within renewables. They are in fact not going to work in renewables. The majority of them that we can pinpoint went to places like Hinkley Point.
What is important about that is that that was not through design, because the jobs in Hinkley Point are only available just now due to the amount of delays due to covid and all sorts of issues that went on there. The reason we have seen this huge upturn in job losses—sorry, not the reason, but at the same time that we have seen the huge upturn in job losses in the North sea, people have had a place to go, which is Hinkley Point. Had that run on time, that would not have been a viable option for them, but it would have been an option if we did have new nuclear within Scotland.
Q51 Torcuil Crichton: I have only two more questions, and I can anticipate the next one. Where is the North sea workforce going? When I meet them at airports, they are going to Taiwan, south-east Asia, or the Caribbean.
Claire Greer: Yes, they are no longer in the UK. We have small pockets of them who have remained in the UK. We have the pocket of people who went to Hinkley Point, but the majority of our members no longer work within the UK. They have left the UK.
Q52 Torcuil Crichton: What is the profile of those workers? Do you have young workers? Are there young members?
Claire Greer: With the members that we have just now, there is a shortage within the middle-aged group. From 45 and up, we have many, many of those people who are looking for new jobs because they are not near retirement and they need other jobs to go to. We have people who took on jobs thinking that there would be a future within the North sea.
We visited the Bruce platform at one point, and Dave was there with us when we did that. We made a video called “A Town Called Bruce” and part of that video was interviewing young people who were carrying out apprenticeships at that time on the Bruce platform. Their concern was where they were going to finish their apprenticeship, not where they were going to work in the future—not where their jobs were going to be; where they were going to finish that apprenticeship within the next four years. Some of the young workers who are coming on board are panicking that they are no longer there. Some of them are jumping ship before their apprenticeships are even finished. There is a real concern about that gap in skills, and where we will get that and where those workers will come from, but the majority of our members are 45 and over within the North sea just now, and leaving the North sea.
Q53 Torcuil Crichton: Are the Government recognising this situation? Is the industry recognising the situation? Is support coming from anywhere?
Claire Greer: Everybody is recognising it, everybody is discussing it, everybody is making acknowledgements towards it. We spoke earlier about the changes in policy that have been made that are recognising workers and communities. Is it doing enough? Is it putting anything in place to sort it out? Absolutely not. I cannot say strongly enough that our members are not leaving the North sea to go and take up jobs within renewables. That is not where those people are going. They are either changing career altogether or they are leaving to work elsewhere outwith the UK.
Q54 Chair: Following up on the question about what the plan is, Tessa mentioned the North Sea Future Plan earlier. Claire and David, my understanding is that industry and trade unions were engaged in the consultation around the North Sea Future Plan. To what extent were your organisations involved in drawing it up?
Claire Greer: I sit on the North Sea Future Board as part of GMB, so we are part of that. Whether or not it will make the difference that we are looking for it to make is still to be seen, but considerable changes have been made over the past six months that have been acknowledged. We would have to say that, for GMB, those changes are a step in the right direction, but on whether they are enough, we do not know if that is exactly what we need to happen. We still need firm guarantees on jobs.
Chair: It is ongoing. David, anything different to that?
David Whitehouse: Yes, we engaged as an organisation and as an industry in the North Sea Future Plan, and I also sit as part of the board, which we very much welcome. Engagement is very much welcome. The one point that I will make, and I have made it to the Minister on a number of occasions, is that, yes, there are good elements within the plan, and that focus on a successful transition is important.
This fundamental issue, though, is that when those who work in oil and gas are simply seen as how quickly we can move them to another job, that is a difficult starting point. We should start from a point where we value the jobs that we have. We do not seek to maintain the status quo, but we must value the jobs that we have. I think it would be very powerful if, as part of that, the Government made it very clear that while we use oil and gas, we would prioritise our own production. That would be a very helpful message and very helpful to put us on a path for a successful plan.
Chair: You have made that point a number of times.
David Whitehouse: Have I? I do apologise, Chair.
Chair: We have heard you loud and clear. Thank you very much.
Q55 Lizzi Collinge: Claire, you spoke earlier about work and more recently about workers feeling like they do not know what the future is and they do not see this plan and that that is even affecting their support for the transition as well as feeling it personally. You spoke about the plans, but in most industries that I know, most workers are not reading Government plans even about their own industry. What would make any plan real for your members and what would give them the confidence that there are industries coming online and that there will be places for them to go, and who needs to do that?
Claire Greer: What they need to hear is that there is a future for their industry, first and foremost. While the rhetoric is that there is no future for oil and gas and the North sea is closing down, that is not supportive for those people within that industry. Also, we need to make sure that as the transition is moving forward, the transition is managed to such an extent that as the decline happens in the North sea, there is a jobs upturn elsewhere, and they do not see that just now.
If we take Scotland on its own, as has been mentioned already, there is no new nuclear. The refineries are closing, the nuclear sites that we have just now are all decommissioning as we speak. Unless you are going to work in renewables or electrification, they do not see a future for their jobs. The problem with renewables is that, again, if we go back to the whole supply chain, even the components that have been made for the renewable fields within the North Sea are coming from abroad. They are not being made here. It has now become apparent that when they come from abroad, they also have warranties on them, so they have people coming from there as well, doing the jobs on them that our members should be doing.
It is almost like every avenue that they point to has either been closed down or it has been offshored. Where else will they go? Right now, until there is some support on that and some tangible plan with results that they can see happening for them and their industry, I do not see how there will be a shift in how they feel about the support. We are surveying our members now across the energy industry to ask these very questions—do you have confidence in what is happening just now in your industry? Do you see a future in your jobs? Would you recommend that people take a job within oil and gas in the future? That survey is still ongoing but it is a resounding no confidence—“We don’t see a future, and we don’t see where we’re heading just now.” That is across our members within energy.
Q56 Lizzi Collinge: You spoke about being told that there is no future in your industry, and I very much understand how difficult that must be, but if it is a declining industry and if we are in an economy now where most people move jobs and move industries multiple times within their careers, is it realistic to have an expectation that they are able continue in that industry, and should we not focus instead on saying what the future can hold for them and giving them that future rather than trying to prop up an industry that is in decline?
Claire Greer: There are two parts to it. It is not about propping up an industry that is in decline. It is about utilising an industry and the commodities that we have as a country and making sure that that is part of the energy mix moving forward. Because of the language that is being used now, the natural decline that should have happened within the North sea is going at a rate of knots that nobody was expecting. We now have this premature decline where jobs are going on a daily, weekly and monthly basis.
That is not a managed decline. That is not a closure of an industry where we have a transition where people can move, because their jobs are going faster than the transition is being created. Are there jobs in the renewable sector for them to go to? At the current time, no, there are not. There are certainly not enough of them, and the ones that are there, as we have spoken about, are not as well paid, and the terms and conditions are corroded compared to what they have now.
The second part is that right now the story for oil and gas is that it is closing down, it will not be there, and these jobs will not be there. We would not have that in any other industry in this country. We would be making sure that we are supporting that and that people have somewhere to go, particularly when it falls back on energy security, falls back on jobs, falls back on taxation, and falls back on the revenue that we raise as a country.
In all these things just now, particularly when we look around us—we are always at the mercy of political relations around the world—energy is probably one of the only industries that fall in the centre of all those issues, and we need to make sure that we support it. If we are not self-sufficient, we are not generating jobs, we are not investing in our own country and we are not making sure that our members and the people who work for us within this country are safe and secure in the knowledge that they will have another job, and the people who live within this country who pay their taxes and work every day are safe and secure in the knowledge that they will turn the lights on and turn the switch on and the lights come on and the heating will come on, we need to make sure that we are doing that as a country. This all falls under that same bracket.
Chair: Thank you very much. That was a very compelling final answer, Claire. We very much appreciate it, both from the point of view of workers and for the security of the country.
Q57 Claire Young: David, you have been very clear throughout the session that you think that the Government should be prioritising domestic production. Yet we do not have a situation in this country, as there is in Norway, where there is Government ownership; it is a market-based approach. We know that it is much more expensive to extract oil in the North sea compared with the USA or the Gulf. Does the oil price need to be above £70 a barrel for it to be economic? In a market-based system, what are you asking of the Government? What does it look like to prioritise domestic production?
David Whitehouse: You are right that it is market-based, as is most of our economy, and as is Norway’s as well. It is quite difficult to extract oil and gas from the North sea; it always has been. We have brilliant people who work in our sector; we should be proud of them. Given the conditions and given a level playing field, we will find ways of getting investment moving, is my view, having worked in the sector for a long time. Do not underestimate the ingenuity and brilliance of UK engineers and UK technicians. We will find a way to make those things happen. We do not need a certain oil price; we just need a level playing field. What is that level playing field? Let’s have language that says that our jobs do matter, and what we do matters. Do not underestimate just how important language is. Language is vital. Then back that up with policy.
Let’s implement that OGPM, the Treasury’s tax regime. Let’s do it now and unlock that investment. Absolutely let’s go through a robust environmental impact assessment that demonstrates that the projects that we want to deliver meet the UK’s goals, and let’s get them approved. In doing so, you create the environment for that investment. That is what we need, but it starts with language. Get that bit right.
In my view, as a probably slightly older member of the workforce, what do we look for? I will tell that you what we need is a pipeline of projects, and of course support for what we are doing. We recognise that it will transition, but we need a pipeline of projects. At the moment, there is not enough certainty in that pipeline of projects. Sometimes it is because carbon storage, for example, needs significant Government subsidy.
We are all in this together. Let’s roll our sleeves up and use our brilliance and we will find a way to make carbon storage affordable and unlock the massive opportunity that it is. That is not for Government to do alone; that is to do in partnership with industry. Let’s get the language right. Let’s use the structure, which is the North Sea Future Board, to do that. There is still a huge opportunity. It starts with the language, supportive policy, and recognising that we are all in this together. If we get this right, we are more secure, we are more resilient, and we can address all the issues we talk about in terms of jobs. But we have got to get the language and the support right.
Chair: I will call a halt there because we have another panel waiting patiently behind you. Thank you all very much for your evidence. David, this discussion will be continued in Aberdeen in a couple of weeks’ time.
Witnesses: Elizabeth de Jong, Verity Davidge and Mark Simmonds.
Q58 Chair: Welcome back to this morning’s session of the Energy Security and Net Zero Committee in our inquiry into managing the future of UK oil and gas. We have the downstream and interdependencies panel. Please introduce yourselves before we start the questioning.
Verity Davidge: Verity Davidge, director of policy at Make UK, representing 20,000 manufacturing companies.
Elizabeth de Jong: I am Elizabeth De Jong, the chief executive of Fuels Industry UK. Our members supply 85% of transport fuels to the UK and include the four surviving refineries.
Mark Simmonds: Good morning. My name is Mark Simmonds. I am the director of policy and external affairs at the British Ports Association. We are the trade association representing ports and terminals—almost every port in the UK. Our members handle 86% of UK port tonnage.
Q59 Chair: Thank you. Before I turn to Lizzi Collinge, one question that comes very strongly out of our first panel is to what extent we have to accept that, unless we subsidise oil and gas industry, it is very difficult to see how it survives.
Elizabeth de Jong: In terms of should we subsidise it?
Chair: It came out very clearly from David Whitehouse that he is looking for subsidies. Is the inevitability that we have to subsidise our oil and gas industry for it to survive and continue to contribute to our energy security?
Elizabeth de Jong: Our members do not want subsidies; they want a level playing field so that they can compete internationally.
Q60 Chair: Isn’t that just another term for subsidy?
Elizabeth de Jong: I do not think it is at all. As you know, we have the highest in the world energy costs. We also have carbon costs that our major competitors do not have at hundreds of millions a year, and they are due to increase in January 2028 and then further again in January 2030 if we align with the EU ETS. A level playing field on carbon costs would make all the difference for us to be able to compete internationally against the middle east, India and the US, where they do not have carbon costs. That level playing field is very important for investment. Our members want to invest and stay here, and they also want stability of plans. We had mentioned carbon capture before. There is just the track 1 going ahead. Carbon capture is requiring subsidy and that is one element.
Q61 Chair: So there are subsidies involved?
Elizabeth De Jong: There are some elements of subsidies that would allow part of the transition to take place, but there is still a great future for liquid fuels in the UK. They are massively necessary and I am sure I will be telling you why that is the case as we go through the session.
Q62 Chair: Yes, absolutely. Verity, is subsidy inevitable if we are going to contribute to our energy security?
Verity Davidge: I align with Elizabeth here. I do not think our manufacturing members are looking for a subsidy for the oil and gas sector. We represent a number of sectors that require oil and gas to be used, particularly as part of their processes and feedstocks—chemicals, paper, glass—but at the moment oil and gas does not factor as heavily, I would say, into members’ concerns because many of them have limited reliance and are using alternative fuels. If you ask them a question around energy more widely, you can imagine what comes to their mind: the cost of electricity and the need to decarbonise—“But I can’t do this because of all the challenges.” The answer is not, coming back, that we need to be subsidising oil and gas.
Chair: Okay, thank you. I don’t know, Mark, if you have a view on it.
Mark Simmonds: I agree. I do not think we would characterise it as a subsidy, particularly looking at the level of tax and levies on profits and extraction and so on. I accept your point that some parts of the system will need some support in storage and so on.
Chair: Okay, thank you. it struck me as something of a theme that came out of the first panel.
Q63 Lizzi Collinge: We heard about the transition away from oil and gas and the impact on energy production workers in the first panel. I want to move to a discussion around the supply chain, both downstream and supplying the oil and gas industry. Verity, how easy is it for UK supply chains to transition from the declining oil and gas sector into renewables? I mean that in both respects: taking the supply from them and supplying to them.
Verity Davidge: Like I said, there is mixed reliance on oil and gas depending on what subsector of manufacturing you are in or indeed where in that supply chain you may be. If you are a tier 1 supplier, you are far more heavily reliant on what then happens. If you are in tiers 3 or 4, you are most likely diversifying into other sectors. We are seeing a lot of that diversification already happen. Manufacturers are alive to what could arguably be declining sectors and therefore they look at new sectors to move into. That is a supply chain reaction.
We understand the importance of maintaining a suitable energy mix that prioritises resilience—part of that is where the oil and gas sector comes in—and also energy independence. Manufacturers are truly aware that oil and gas need to be part of that transition but also, equally, maintain that a renewables-led system is the way forward. They are more forward-planning, perhaps, and less alarmed.
Q64 Lizzi Collinge: What about the supply chain to the renewables sector? We heard evidence in the first session that the renewables sector is often reliant on supply chains from abroad and warranties from abroad. Does that reflect the experience of your sector?
Verity Davidge: In part, yes. The challenge has been the business environment and policy certainty, or indeed uncertainty. If you are going to make a commitment to be part of that renewables supply chain, are you certain about the policy direction of travel and that it will not change? What we have seen in recent changes is that it absolutely changes.
If you look at the automotive sector, the transition to net zero and the ZEV mandate, so much of the supply chain has made significant investments towards a certain policy direction and target. When you change those targets you do it assuming that it is for the good of the industry, but it can have unintended consequences. I think the same applies here.
Q65 Lizzi Collinge: Rolling back on commitments previously made can be worse for industry.
Verity Davidge: Yes, absolutely. Uncertainty is always the biggest threat to business. What is assumed to be maybe a small policy lever or changing the direction of travel can have huge impacts, particularly on those lower down in the supply chain that have made longer-term investments. That is the reason, perhaps, we do not have that solid supply chain for renewables in the UK, but it doesn’t mean we can’t. We have an industrial strategy now. We have a direction of travel. We have a clean energy strategy. We have begun to put all the frameworks in place. It is now a case of what policy levers are needed to spur on the investment and make sure we have the right skills to make sure that the renewables supply chain is resilient.
Q66 Lizzi Collinge: Thank you. I want to bring in Mark at this point. I have a port in my constituency, Heysham Port, and I want to know more about the role of ports in the supply chain transition. What do you think the role of ports is in this transition and this supply chain issue?
Mark Simmonds: Ports obviously play a huge role in supporting oil and gas, or liquid bulk as we call it. Oil, gas and other similar products account for about 40% of port volumes at the moment. There has been a long-term decline over many decades in those volumes. That is well understood and ports are ready and managing that transition. Now, some ports that handle large volumes of oil and gas will also be a big part of the growth in offshore wind—others perhaps less so because of where they are or for other reasons. Offshore wind is probably by far the biggest opportunity available to our sector at the moment.
Q67 Lizzi Collinge: What changes need to happen in ports? You are talking about quite different products there. Are there ports that are used for oil and gas that would struggle to do turbines and things like that? What about the infrastructure need for that?
Mark Simmonds: There is not so much of an overlap in the infrastructure. Marine infrastructure, deep water, and those sorts of things will be useful for any cargoes, but offshore wind—particularly the newer generation, the larger turbines, and the floating turbines—generally needs quite specific infrastructure that is quite expensive. They need a lot of laydown space. They need deep water at the berth, heavy lift quays, and those sorts of things. The newer generation of offshore wind is more difficult to co-locate with other types of cargoes. Oil and gas generally do not co-exist with other things anyway.
It is not so much the infrastructure; it is where the ports are. Obviously, it is not all about the North sea, but where you have a lot of oil and gas activity in the North sea, there is a huge amount of offshore wind activity as well. There will be plenty on the west coast too. It is more because of geography, rather than infrastructure, that you see overlaps in various ports.
Q68 Lizzi Collinge: I want to quickly ask about international competition in the supply chain from China. Elizabeth, how vulnerable are UK supply chains to that competition and what do we need to be doing to support domestic supply chains?
Elizabeth De Jong: The transition is very complicated. Fuels underlie every sector in the UK—manufacturing, construction—every hour of every day. We often focus on electricity in the transition, but in fact the future will need hydrocarbons, and the Climate Change Committee still has a reduction of 50% of hydrocarbon demand by 2050. Asking about the importance of supply chains is critical, whether UK-produced or foreign-produced, whether we are importing or making things here. We—the fuel sector—are massively exposed to carbon leakage. We are the most exposed sector, and we have no effective support.
Q69 Lizzi Collinge: Can you explain what carbon leakage is?
Elizabeth De Jong: Carbon leakage is where the UK pays carbon taxes through the emissions trading scheme. Because it is a commodity and the price is a global price, it is more expensive to produce it in the UK because we have carbon prices that competitive countries do not have. What happens is that because we are more expensive, our industries close. We have seen that. Since the ETS was introduced, five refineries have closed, and instead we import more from countries like the middle east, India and the US. We lose our jobs here. We still do not have commitment to a carbon border adjustment mechanism. It is bad news for our sector and I am very concerned.
Mark Simmonds: There are two quick points I would make from a ports’ perspective. First, we have been very supportive for a long time of greater UK content rules for offshore wind projects. What this Government and the previous Government have done so far has been broadly successful at bringing more supply chain activity into the UK, but we would like to go further on that. We would also like to see some more direct support for supply chains in and around ports, which will make us more competitive.
We would also like to see a clearer statement from the Government about what they want and where they are on foreign investment in UK supply chains. We have had some unfortunate episodes recently with investment being lost because of lengthy decisions from the UK Government around national security and other things. We understand that there are other considerations, but we would like to see a clearer understanding from the UK Government about what is acceptable.
As a slightly broader point, our eyes are on closer competitors in that UK offshore wind is a huge opportunity for UK ports but there is no guarantee that that work, those jobs, and the prosperity associated with it will come to UK ports. It can be done from a lot of European ports. We are competing with European ports in Denmark, Norway, Germany and elsewhere. We are also looking for a level playing field for ports in a more competitive regime that allows us to build our infrastructure more quickly and more cheaply. That is a big concern for us—that we lose out on broader supply chain stuff to European ports.
Chair: Thank you very much. We heard the same evidence when we visited Port Talbot last year. It was competition with France in that case.
Q70 Graeme Downie: I have a number of oil and gas supply chain businesses in my constituency but most of them are export services. What benefit does the UK get from having a domestic oil and gas industry if these businesses spend a lot of time exporting anyway, Elizabeth?
Elizabeth De Jong: In export revenue there is £11 billion from the refining industry and that is of great value. In terms of the UK value of refining, we have jobs—4,000 directly and 100,000 in the supply chain. We have put in studies before of the impact of Grangemouth and that closing. These are in industrial heartlands that really need the jobs and they are well paid.
Q71 Graeme Downie: If these businesses are exporting anyway, what is the effect of a reduction in domestic UK oil and gas services?
Elizabeth De Jong: They produce for the UK as well as export. Because of where they are placed, they will export some product and produce for the UK.
Q72 Graeme Downie: Would you say they are secure no matter what happens in the North sea or to UK oil and gas?
Elizabeth De Jong: Not at the moment at all because without that carbon leakage protection, their exports will not be competitive either. We are asking for a carbon border adjustment mechanism but also for it to apply to exports in a way. Those are not secure either. In south Wales I think the refinery there accounts for 15% of export GDP. It is significant.
Graeme Downie: Verity, did you have anything to add to that?
Verity Davidge: Just that we should still see that as a great positive, because if we go back to the need for growth, which I think is what we all want but seem to be missing at the moment, trading and exporting is the way we are going to get that. I see your point that it is not serving the domestic market but if we are still exporting, we should help those companies in your constituency, those supply chains, to continue with those exports and, to Elizabeth’s point, to tackle the costs that are making exporting less competitive than it could be. We could be even better.
Q73 Graeme Downie: As part of transition, should we be looking to make those businesses 100% export? Are there ways and how can we try to support that, if there is a long-term decline in UK oil and gas?
Elizabeth De Jong: The opportunity for 100% export—we would want to also supply the UK. I am not quite sure how making—
Graeme Downie: If, say, there is a 20, 30, or 40-year decline in UK oil and gas and therefore less of a domestic market, how do you try to make sure that those businesses are supported? Does it become: those are market forces?
Elizabeth De Jong: It will not be 100% not needed in the UK. All the projections show that there will still be both oil and gas, and that other hydrocarbons that the refineries produce will be needed in the UK. Every single forecast towards net zero shows that there is still great demand. For example, for 2050, the SAF mandate is assuming 50% of fossil fuels in the mix. We must not think that there will be no demand in the UK for the products from oil and gas. We still will be dependent on them for the future.
Yes, in growing exports, there is opportunity for refineries to be a growth industry. We could be a growth industry in clean technologies. We could be a growth industry in fossil fuels. We could be a growth—
Q74 Graeme Downie: What do we need to do to support those kinds of things—that kind of diversity?
Elizabeth De Jong: We must have a level playing field, first and foremost, with an export mechanism because—
Q75 Graeme Downie: I share the Chair’s scepticism about level playing fields and different wordings for how we support or choose not to support. How do we decide what area to focus on and help them with, and what does that level playing field look like? Which playing field is level?
Elizabeth De Jong: We are asking for a carbon border adjustment mechanism. Our carbon costs are the most important. In January 2027 we are introducing a carbon border adjustment mechanism for a variety of other industries, but refining did not make the cut the first time. It is being assessed now but we still have no date for it to be implemented. That is our ask.
With an effective export element to that, there is opportunity for growth in the future as well as protecting the UK from these very long supply chains as people will need or seek to replace them in all sorts of everyday products. Manufacturing, construction, renewables—all will need a form of hydrocarbon.
Q76 Graeme Downie: Verity, what impact would a change in policy to either reverse or accelerate the decline in domestic oil and gas production have in the UK, or in UK manufacturing?
Verity Davidge: As I mentioned at the start, most manufacturers are using a suitable energy mix. There is a need for oil and gas for immediate resilience. As we have seen recently with geopolitical shocks, time and again having alternative fuels and access to wider fuels is something companies need, but we also need to match that with the longer-term renewables piece. I have the stat: 74% of manufacturers believe that renewable-led power is the route to cheaper power, and they are investing and focusing on that.
Yes, there will be, as Elizabeth has already pointed out, that immediate reliance and a transition, but a lot of manufacturers are already moving toward more of a renewables-based energy supply. We just have to make sure that policy levers reducing the cost of electricity happen to make that transition successful.
Q77 Graeme Downie: One last brief question. We have a difficulty sometimes in these sectors where energy is reserved to the UK Government, but we have skills policy devolved to the Scottish Government. [Interruption.] That is often my reaction as well. What engagement are you having with the Scottish Government? We heard from the previous panel about the lack of opportunities in nuclear skills. Presumably, that is a supply chain implication for manufacturing as well. What engagement do you have with the Scottish Government around ensuring that we have the right manufacturing skills for energy—oil and gas, renewables and all the great things you are talking about—in a country where perhaps they are less convinced of the need for these skills?
Verity Davidge: Skills policy being devolved is a huge frustration for ourselves and many manufacturers. While the brand is Make UK, we represent manufacturers in England and Wales and we work with our counterpart, Scottish Engineering. I would be honest and say the engagement with the Scottish Government has been limited. Our focus has been on the jobs plans that the Government are currently putting together, both the clean energy jobs plan and the advanced manufacturing jobs plan.
There is probably more work we can do to make sure we are aligning that because it is a big frustration. Many manufacturers, even when they are small, can be multi-sited, and they are going to have one jobs plan here and then something completely different in Scotland, which I know you probably hear all the time. It is not even—
Q78 Graeme Downie: Yes. My concern is always the loss of opportunities for people in my constituency, frankly, because they will move people from England rather than—
Verity Davidge: Yes, and I think that is a fair challenge that we go away and speak to Government, having had a conversation recently on the jobs plan, both on clean energy and advanced manufacturing, and say, “What about Scotland and Wales?” I do not, from the current versions I have seen, believe that they take that into account.
Graeme Downie: Thank you.
Q79 Mike Reader: I am going to talk about procurement. The UK spends an estimated £25 billion a year on offshore energy-related activities. Around 50% of that is spent in the UK or would be delivered by UK workforce. How does it compare between the oil and gas sector and the renewables sector, Elizabeth? Do we see more value capture in oil and gas or in renewables?
Elizabeth De Jong: I don’t have those numbers. We were talking about something similar in the team. If we have them, I will write in with them.
What I am noticing on that topic is Government talk now about the value of buying British. We have had the strategic defence review, which has said the UK must reduce exposure to hostile supply chains. Fuel would be ideal for that. We have seen the Chancellor talk about buying British in order to rebuild industrial capability in areas that are vital to national resilience. She did not mention fuels, but fuels would be, again, ideal there.
Q80 Mike Reader: Do you think the UK taxpayer is willing to pay a higher price for UK fuel compared with cheaper fuel imported from overseas? Isn’t cost of living the big driver for the people who live in the UK?
Elizabeth De Jong: The cost is a global price; the issue is where it is manufactured. Because we have our carbon costs and our high energy costs, it is four times cheaper to make fuel in the US than it is in the UK. This is a discussion about where we want jobs to be and where we want our energy security to come from.
Q81 Mike Reader: Do you think the UK taxpayer cares where their fuel comes from? They just want cheap fuel, don’t they?
Elizabeth De Jong: The UK taxpayer is probably interested in many things, as we are. It is us in this room as well. As UK taxpayers, we are interested in jobs, in energy security, and in whether the jobs we are supporting are from here or from the middle east. We are interested in many different topics. I am sure having a good, solid UK industry that we can rely on is important to people in this country.
Chair: You should be in politics, Elizabeth. That was a wonderful answer.
Q82 Mike Reader: Verity, Fuels Industry UK is advocating for much more domestically produced goods and domestic supply chains, which I think we would all support. Does the procurement framework in the UK support that ambition? Is it easy for UK businesses to compete and to win work?
Verity Davidge: In short, no, particularly if you are a small or medium-sized company. Some will struggle with where to begin. Others will struggle with how to write a successful bid for a tender. Then they will try to navigate through: what will success look like? What are the criteria I need to put into that in order to be successful?
Perhaps relevant for this inquiry is that if a contract is very much focused on decarbonisation, net zero and green credentials, you are probably going to have to look at the fuels that you are using for them. That is why I think companies are becoming more alive to the fact they need to quickly transition more to renewables.
Q83 Mike Reader: Procurement in the supply chain is going to be business to business. Government will do some procurement but most of the procurement is in the supply chain. Why are businesses making it harder for their supply chain to win work?
Verity Davidge: If an OEM has a Government contract and, therefore, the procurement is ultimately within its supply chain, then that is going to filter down. It will also have its own targets and ambitions that it wants to achieve, and it is reliant on its supply chain to fulfil them. If it has public or regulatory net zero ambitions, then its supply chain is going to be a key part of that. It will have to ask the questions.
Q84 Mike Reader: Is it more the obligations the Government place on tier 1 of industry filtering through its supply chain that are the blocker, rather than procurement processes themselves?
Verity Davidge: It definitely plays a part in it, yes. Some companies would say that they are completely locked out because what that tier 1 wants or needs to deliver is not accessible or deliverable lower down in the supply chain.
Q85 Mike Reader: Tier 1s passing their liabilities through the supply chain is a potential blocker to UK businesses accessing this £25 billion a year of offshore energy-related spend.
Verity Davidge: I think so, yes.
Q86 Mike Reader: Thank you. We talked a lot about local content. We saw the clean industry bonus in the latest CfD rounds. I do not know if any of you have any views on other mechanisms the Government could use to further improve UK content within the contracts they set.
Mark Simmonds: It is not so much a mechanism, but we would like to see more investment in supply chain capacity in and around ports. That benefits that supply chain, UK jobs, and the ports themselves. I would not go as far as to call it a mechanism—just tried and tested investment in the capacity we need.
Q87 Mike Reader: Is that a subsidy to support manufacturing building up around the ports?
Mark Simmonds: I would not call it a subsidy; I would say it would be support to establish fabrication for the parts we need to build out—
Q88 Mike Reader: What is the difference between support and a subsidy?
Mark Simmonds: Support would be CapEx to build a factory, for example. I would think of subsidy as ongoing support to that business, which I do not think is necessary.
Q89 Claire Young: I would like to talk about the interdependency with refineries. Elizabeth, when you came to see us in October you talked about how vital refineries are. How have international events since you gave evidence to us impacted the role of refineries in the UK’s oil and gas sector?
Elizabeth De Jong: I think they have really demonstrated the value of UK refineries producing fuels for the UK, rather than relying solely on faraway nations. I think they have also increased the political understanding that the number of refineries a country has is important for its resilience. There is understanding that a year or so ago, when we had two more refineries, we were more resilient than we are now and we would have been able to weather some of those shocks more easily. Government knew this in theory, but it has brought it to life.
However, even at this time, we still do not have any policy changes that are so needed to help refineries continue to be in the UK. We still do not have a date for our carbon border adjustment mechanism. We still do not have a date for even when it is going to be assessed. It has shone a great, positive spotlight on the industry and its importance, but still nothing has happened because of it.
Q90 Claire Young: We heard in the last session that the oil to be refined in the refineries is imported from elsewhere. We have that interdependence, do we not, with other countries, even with our refining sector?
Elizabeth De Jong: Yes, we will get crude from different places around the world, but the crude market is more liquid. There is more crude than there are refined products. It is a tighter market. There have been studies in the past—Deloitte 2015—that show that the more you produce, the less impactful the shocks are because of that. It is easier to weather the storms.
Q91 Claire Young: Do you think that delays to sanctioning the import of refined fuels from Russian crude undermine efforts to support the domestic refining capacity?
Elizabeth De Jong: There were very few refined products from Russia being imported to the UK, so it has made very little difference.
Q92 Claire Young: We are not talking about refined products coming from Russia, we are talking about—
Elizabeth De Jong: The Russian crude.
Q93 Claire Young: Russian crude, yes, being refined elsewhere.
Elizabeth De Jong: They were at a very low level in any case.
Q94 Claire Young: It is not having much of an impact.
Verity, what do domestic refineries offer UK manufacturers over imports from friendly nations?
Verity Davidge: I do not know. I guess it is more local access and the fact that, as Elizabeth said, refineries in the UK have become more resilient. It is interesting that after each shock the sector becomes more resilient, but what does not catch up is the policy to support it. I think we have seen that with the latest in the middle east. Also, an average manufacturer wants as local access to that fuel supply as possible. Where they can, they are going to prefer it to be in the UK rather than overseas.
Q95 Claire Young: You said that after every shock it becomes more resilient, but Elizabeth seemed to be suggesting that nothing has changed; that it may have given Government a greater understanding, but that has not translated into anything. In what way has it become more resilient?
Verity Davidge: I guess Elizabeth’s point was more that the refineries still remain, as opposed to that after this shock we are losing more. I think it is the case that Government policy has not learned its lessons. As Elizabeth said, on CBAM and everything we are still moving so much more slowly, but Elizabeth will have more to add on that than me.
Elizabeth De Jong: I could add a little on friendly nations. I think we have to be careful about those terms. Our main importer is the middle east, where we get most of our imports. From the Netherlands, it often comes via other countries, and there is the US as well. I think we should take the view that any of the countries that we import from could decide to prioritise their own nations. We saw that China and India, I think, in March both stopped exporting and decided to prioritise their own nations. We have to be aware of that.
Q96 Chair: Just for the avoidance of doubt, you were not suggesting there that the Netherlands was not a friendly nation, were you?
Elizabeth De Jong: No. My husband is Dutch, so he would do something.
Q97 Chair: I may have known that. On the subject of refining in the Netherlands, how much North sea oil is refined in the Netherlands and—in theory at least, because they are not necessarily the same molecules—how much of that comes to the UK as finished product?
Elizabeth De Jong: To my amazement, I have those figures in front of me: 89% of North sea oil goes to north-west Europe and 65% of that then will come to the UK as products, as the fuel, diesel and so on that we use.
Q98 Chair: Do you accept that qualifies as being refined by friendly nations?
Elizabeth De Jong: I will leave that to the politicians. [Laughter.]
Q99 Torcuil Crichton: Mark, how are ports navigating this transition? Obviously, we cannot have an oil and gas industry without ports, and some renewables are going to be offshore. How does the lead-in time and that transition work out for you?
Mark Simmonds: It is a tricky time. What we are looking for is an overlap. You have heard a lot today already about the jobs and skills and the overlap there. We are seeing oil and gas decline faster than we would expect and would like, and offshore wind not picking up as quickly as we would like at the moment. We worry that there is going to be a gap opening up between the two, which presents problems for investment, jobs, and that transition.
There has been a lot of investment already from ports in infrastructure to support renewables. There is a lot more to come if that picks up. That is in part dependent on support from Government in various areas, not least the supply chain things that we have talked about already but also the wider pipeline and perhaps other areas, such as guarantees, clearer rules on investment and, as I have already mentioned, a more competitive regime for us. It is tricky at the moment—it is a tough time—but we are still optimistic about the future for renewables, as well as carbon capture, hydrogen, and other things. It is not all offshore wind.
Q100 Torcuil Crichton: It is tricky and it is going to be uneven. There are going to be some winners and losers among the ports, as these changes take place. Do freeports and green freeports have an advantage over others?
Mark Simmonds: There are some benefits. I would not overstate the benefits from freeports and green freeports. Some of the benefits that you can get from those are now available from other mechanisms, like investment zones. I think they have all been renamed now and forgive me, I have forgotten what they have been renamed to, but there is place-based support for lots of ports, even those outside of the freeport regime.
We would still like to see more. We think the freeports have been successful. I would not say they are going to change the world, but they have been really good for the areas where they are, helping to bring in and secure good jobs and investment in those areas. We are still confident that ports that do not have them can benefit from the transition.
Q101 Torcuil Crichton: You talked about east-west geography. Geographically, are there any big winners? Do any ports have clear advantages?
Mark Simmonds: There has been a lot of activity on the east coast and a lot of ports up and down the east coast, from Shetland down to Great Yarmouth and Lowestoft. They are all benefiting from it, but we are seeing stuff in the west too and I think there is more to come there. We are very excited about the potential on the west coast.
Yes, there have been winners so far from offshore wind, but as I said, we are a bit nervous at the moment. We would like to see a bit more from Government in helping to overcome some of the challenges that we are facing.
Q102 Torcuil Crichton: Our last question on that subject: what can ports do to take advantage of transition and what do you want to see from the Government to help you take advantage of this transition?
Mark Simmonds: Ports are already doing a huge amount. There has already been hundreds of millions of pounds of investment all over the UK, in every part of the UK, into new infrastructure to be ready for offshore wind, and there are more that are ready to do so. There are plenty of ports that have either consented or are exploring new developments for that. There is a huge amount of work to be gained, and as I said earlier, we are keen that we capture as much of it as possible. In the UK, our fear is that we lose a lot of that to European ports.
Ports are ready. There are lots of plans, as I said, at various stages—a lot of it already built, some of it consented and some of it still at earlier stages—but we need a bit of support from Government in the areas that I have talked about around supply chains, pipelines, and other areas.
Q103 Torcuil Crichton: I asked about the winners. There are going to be losers as well because ports will compete, will they not?
Mark Simmonds: Yes. The UK port sector is unique in the world in the way it is set up. I think we are the only country in the world that has a ports industry that is fully independent of Government in how it is governed and financed. It has been that way for 30 or 40 years and it has produced a sector that is highly competitive, both within the UK and with European ports.
Yes, there may well be losers from that long-term decline in oil and gas, but I think it has always been pretty clear what direction oil and gas is going. As I said, it is a bit quicker than we would like at the moment, but a lot of ports are preparing and most of those that have significant oil and gas throughput already have plans in place for what they do next. For many of them it will be offshore wind. Others, where that is not suitable for one reason or another, will be looking at other things. There are loads of examples all over the UK of how they are preparing to do other things.
Q104 Wera Hobhouse: Can you explore a bit further the impact of low-carbon alternatives on sectors dependent on fossil fuels? You have already mentioned that oil and gas is declining faster than renewables are coming on. What impact will that have on ports?
Mark Simmonds: There are individual impacts on ports that have significant throughput from oil and gas or exposure to those markets, particularly in the North sea, which will see their revenues dropping. Renewables—offshore wind in particular—perhaps not moving as quickly as we would like would have similar impacts. That can be tricky for ports that are looking to build infrastructure, which has long lead-in times and specific design needs, and needs to be financed.
Then there is the overlap between the two and, again, as we have been exploring today, the crossover and the skills that are needed when moving from one to the other. There are impacts specific to each of them and then there are some that touch both of them, which would be skills.
Q105 Wera Hobhouse: How would you describe the pace of the roll-out of electrification?
Mark Simmonds: Electrification is another challenge that we have, connecting up the transmission network for renewables that are coming online. We have difficulties with the connections and process in various areas. One is that we would support faster connections for offshore renewables that are coming online. As businesses, our sector is very ambitious when it comes to decarbonising our own operations. We share difficulties with other industries in getting the connections that we need to decarbonise our operations and build out new infrastructure in future, which will likely be electrified rather than operating from diesel as most things are now.
We share the pain of many other industries that are trying to decarbonise or electrify operations. That is very high on our agenda at the moment, as well as the broader issue about connecting up new generation from the large wind farms. Most ports will have large solar arrays on warehouse roofs and things like that, some of them have onshore wind turbines as well, and many of them find it very difficult to connect their own generation back to the grid and export their own power. We are seeing difficulties from all sides on the connections process.
Q106 Wera Hobhouse: I took some interest, although I am not the MP for Dover, in the fact that for the port of Dover to get electricity to decarbonise the shipping, across a short strait, seems to be a problem. I need to move on, but I know your difficulties.
Verity, how can the Government manage the pacing or sequencing of industrial decarbonisation to avoid causing disruptions to supply chains?
Verity Davidge: To answer that question and build on what Mark said on electrification, 63% of manufacturers have taken steps towards electrification—that is hugely positive—and 87% said that they were keen to do more and invest more if we managed to get the price of electricity down.
Q107 Wera Hobhouse: Could you concentrate on the ones that depend on fossil fuels still? How is it going for them and what do they need?
Verity Davidge: They need the cost of electricity to go down. We seem to be far off that. The Government have launched their British industrial competitiveness scheme, BICS, which will support up to 10,000 manufacturers, which is great—it has increased from 7,000—but a far way off the 130,000 manufacturing businesses that we have in the UK. My concern is that it will not capture those that are probably reliant on fossil fuels. It might not move it forward. It will reduce their energy costs, but will it support it? I think there is still a big question mark, which is why we are pushing for those schemes to cover all manufacturing.
Q108 Wera Hobhouse: A last question to Elizabeth because I think we need to move on again: do electrification and low-carbon alternatives undermine the business case for UK domestic refineries?
Elizabeth De Jong: No, not at all, when we think about how much fuel is going to be needed in the future to underpin manufacturing, which is something I want to say; it is absolutely ingrained in everything they do. It is 97% of transport fuels, getting people to work and getting the product.
We support renewables through the manufacturing of lubricants, carbon fibre, and cooling fluids, as well as all the things for the chemical sector; 50% of feedstocks for the chemical sector come from refineries. With the right policy framework, refineries can make investments for the future—SAF, renewables, hydrogen—but without it, those will go to the middle east. The future could be a bright one for refining, and the fuels will be needed in our lower-carbon future as well as now.
Q109 Chair: Thank you. That is a good note to get to, Elizabeth. It is something we heard in Alberta, Canada, last week about the reality of where oil finishes up.
How important is it for the wider UK economy that we retain refining capacity to give us domestic supply chain resilience, quite apart from what is going on with energy? You mentioned, which I thought was really striking, that it is 50% of chemical industry feedstock. If you add in things like bitumen, long term, how sustainable is it to retain a refining sector in the UK? How important is it?
Elizabeth De Jong: Yes, pharmaceuticals, plastics, fertiliser, paints, adhesives, lubricants, all the things you have mentioned, every single case of those would have to import—
Q110 Chair: What proportion of your capacity is it, is it 50% or is it a bit more than that, when you include everything that is not direct energy?
Elizabeth De Jong: I will need to come back to you on that number.
Q111 Chair: Yes, but fundamentally it is essential.
Elizabeth De Jong: It is absolutely essential.
Q112 Chair: Verity, for your members, the same point, presumably? It is about a lot more than energy.
Verity Davidge: Yes, absolutely. It is essential and we need that sustained mix of energy. Increasingly, access to it—whichever fuels you are accessing—and the cost of it, is making us more and more competitive. We are seeing some of the worst, what I would call grim feedback from our manufacturing members at the moment on costs, and it is all related to energy costs. We need to sustain what we have and make sure that manufacturers can access it.
We have a quarter saying that they are going to run out of cashflow in the next 12 months. We have one in 10 saying that they are going to be insolvent in the next year. These are really worrying times. We need to make sure that they have the broadest access to all forms of energy possible.
Q113 Chair: Yes. A number of times you mentioned CBAM as a very high priority ask. Are there other recommendations that you would like us to make to the Government?
Elizabeth De Jong: We talked a little earlier about stability for plans and delivering those plans. We talked about it in carbon capture, which can be provided by incentives as well as subsidies—I meant to make that point as well—as they are doing in the US.
The other is enabling regulation. I am working on a number of very live topics where we are going for gold-plating, more regulation than anywhere else, and I can give you many examples of that. We are still not seeing those 25% reductions in regulatory burden in the UK.
Chair: If you could write to us about the regulatory detail, that would be helpful.
Elizabeth De Jong: I can give you those examples.
Chair: Verity, similarly, and Mark as well—that would be a very good follow-up for us. Thank you all very much for your evidence this morning.