Labour’s plan to ban new oil and gas drilling is “economically senseless” and threatens to bring forward rig shutdowns by a decade, a major North Sea operator has warned.
Amjad Bseisu, chief executive of Enquest, said blocking new drilling licences would put jobs and investment at risk, while bringing forward shutdown costs for the taxpayer.
The company operates oil and gas platforms as well as the Sullom Voe terminal, where huge quantities of oil from the West of Shetland basin are processed.
Labour has vowed to block all new oil and gas developments if it comes to power, investing in renewable energy instead.
Mr Bseisu warned that if a ban on new licences is introduced, Enquest’s two large Magnus and Kraken platforms would become less economic and be put at risk of early closure.
In that scenario, Magnus would have to be decommissioned 10 years early in the mid-2020s. The date for Kraken, which is currently scheduled to shut down at some point between the late 2030s to the early 2040s, would likely move forward by five years.
That would hit the Treasury with extra costs earlier than expected, as oil companies receive big tax breaks for decommissioning.
Speaking to The Telegraph, Mr Bseisu said: “If the Government [under Labour] said there’s no new field licences, it would be economically senseless.
“It will exacerbate the decline of the industry and actually exacerbate the costs to the taxpayer, because we will have to decommission everything sooner rather than later.
“You drill a well and the well declines. Without drilling another well to extract further production, decline rates will be exacerbated.
“And once you get to a certain level in a field, it becomes uneconomic and you have to go to decommissioning. I would assume, in many cases at least, a decade acceleration in field life.”
Mr Bseisu added: “We will still need oil and gas. And [if we ban new drilling], we will just end up importing more and destroying jobs in the UK, having a higher carbon footprint and a larger trade deficit.
“It should be evolution, not revolution – it’s called a transition.”
Labour has insisted that there are enough existing North Sea licences to ensure production continues and argued that granting more conflicts with Britain’s agreements to tackle climate change.
On Sunday a party spokesman said: “Labour is proud of our close working relationship with the oil and gas industry.
“Shadow energy secretary Ed Miliband and Labour leader Keir Starmer visited Aberdeen in November 2023 for discussions that were praised by leading industry figures.
“Unlike the Conservatives, whose own Energy Bill has been criticised by the industry and led to one of their MPs resigning, Labour has an industry-backed plan to deliver energy security for our country.”
It comes as the developer behind Cambo, Britain’s largest and most controversial remaining oil field, races to seek approval for the project before an autumn election.
Shell, the previous owner, cancelled its plans to develop Cambo in 2021 after a huge backlash from environmental groups and senior Labour politicians including Ed Miliband, who repeatedly attacked the company and the project.
But Ithaca Energy, which bought out Shell’s share, now says its final development plan will be lodged within months, with development to follow over 2024 to 2026.
Ithaca said the aim was to get the project fully approved before autumn 2024.
Cambo could produce about 170m barrels of oil equivalent during its 25-year operational life at half the carbon intensity of the average barrel of North Sea oil, according to the company.
It has also promised there will be no gas flaring at Cambo and that its rigs will be powered by electricity, rather than gas or diesel.
Israeli-owned Ithaca is also involved in the similarly controversial Rosebank development, which is led by Equinor.
As part of the UK’s target to reach net zero, Enquest is separately working on plans to use the Sullom Voe facility for sequestering carbon emissions under the ocean.
Under the scheme, which is awaiting a final investment decision, the company would receive liquified carbon dioxide from tanker ships at the terminal before pumping it through existing pipelines into depleted oil fields.
Enquest is also looking at potential green hydrogen or green ammonia production facilities, powered by nearby offshore wind farms in Shetland.
Green hydrogen has been touted as a potential replacement for natural gas while green ammonia could replace chemicals used to produce fertilisers or be made into fuel for container ships.
Mr Bseisu said final approval for the scheme would depend on the UK successfully striking agreements with other countries to allow CO2 shipments.
The company has already secured carbon storage licences from the North Sea Transition Authority.
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2024-01-21 18:53:00Z
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