Oil and gas ban: British Labour Party looks to block new licensing as New Zealand lifts ban

The leader of the Labour Party in the UK, Sir Keir Starmer, is standing by a pledge to ban new drilling in the North Sea if he becomes Prime Minister next month, despite New Zealand abandoning a similar policy amid blackout fears.

The British Labour Party’s manifesto, due out this week, will feature a pledge to block all new licensing for oil and gas as one of its key energy policies.

The party “will not be issuing licences to explore new [oil and gas] fields as we accelerate to clean power”, a Labour spokesman confirmed earlier this week.

It follows last weekend’s announcement that New Zealand’s Government was lifting a ban on new oil and gas exploration.

The ban was announced by former Prime Minister Jacinda Ardern in 2018. “The world has moved on from fossil fuels,” Ardern proclaimed at the time.

New Zealand’s trailblazing policy, which was the first of its kind, became a key inspiration for the British Labour Party’s own plan.

However, some in the party are now questioning the commitment after New Zealand Resources Minister Shane Jones last weekend denounced its own ban as a disaster – and revoked it.

It followed three years of rising energy prices that have left 110,000 households unable to warm their homes, 19 per cent of households struggling with bills and 40,000 of them having their power cut off due to unpaid bills, according to Consumer NZ.

Since April the situation has further deteriorated: New Zealand’s Transpower, the equivalent of the UK’s National Grid, warned that the nation was at high risk of blackouts.

New Zealand’s shift to renewables meant it no longer had the generating power to keep the lights on during the cold spells that mark the Antipodean winter, said Transpower, as it begged consumers to cut their electricity consumption.

The threat to New Zealand’s energy security comes despite the fact that geologists have discovered billions of cubic metres of natural gas in the seabeds around the country.

Sean Rush, a leading New Zealand barrister specialising in petroleum licensing law and climate litigation, called the oil and gas ban “economic vandalism at its worst in exchange for virtue signalling at its finest”.

Rush warned Britain off a copycat policy, saying: “There will be no benefits to UK energy security by banning new exploration drilling. You will simply disown an industry in which the UK has been world-leading.”

Jones said last week: “Natural gas is critical to keeping our lights on and our economy running, especially during peak electricity demand and when generation dips because of more intermittent sources like wind, solar and hydro.”

Such warnings are echoed by energy experts in the UK, where over 75 per cent of total energy consumed still comes from oil and gas.

Half comes from UK waters – but it too will drop off a cliff if Labour implements a ban on new drilling, warns the industry.

Offshore Energies UK (OEUK), a trade body, says there are about 280 active oil and gas fields in UK waters – of which 180 are due to shut down by 2030.

Without new ones to replace them, UK gas production is predicted to more than halve by the end of the decade.

Jenny Stanning, director of external affairs at OEUK, says exploration is essential to simply slowing the decline in output.

“The New Zealand experience shows how important it is for countries to carefully manage energy transition and energy security. We will need oil and gas for decades to come so it makes sense to back our own industry rather than ramping up imports from abroad.”

The scale of the UK’s reliance on oil and gas is huge: the nation consumes 77 billion cubic metres of gas a year. That’s equivalent to 1100 cubic metres per person, or 14 double-decker buses’ worth in terms of volume.

About 40 per cent goes to generate electricity while much of the rest is burned in the 25 million homes that rely on gas boilers for warmth and hot water. We also consume about 61 million tonnes of oil – just under a tonne per person – most of it used to power our 32 million cars.

Claire Coutinho, the Conservative Energy Secretary, claims that the New Zealand example shows the risks of Labour’s cavalier attitude to the North Sea.

“Labour’s energy policy is a mess,” she said in a tweet. “Their proposal to ban new oil and gas licences was tried in New Zealand. They struggled to keep the lights on and have now had to reverse it. Climate policy can’t come at the cost of our energy security or it will fail.”

Sir Keir Starmer. Photo / AP

Sir Keir Starmer has, however, repeatedly made clear his party’s determination to move on from fossil fuels. The end of oil and gas extraction “has to happen eventually” and the “moment for decisive action is now” he said in a speech last year.

Green groups are pushing Labour to stick to that commitment. Tessa Khan, executive director at Uplift, an environmental group that campaigns to shut down UK oil and gas production, says it is “laughable” to blame New Zealand’s energy problems on the ban on new exploration licences.

“The real lesson for the UK from New Zealand’s experience is the need to accelerate the rollout of homegrown renewable energy,” Khan says.

“Banning new licensing provides a clear signal to the oil and gas industry that the UK Government is serious about the transition and that companies now need to deliver on their long-advertised clean energy promises.”

Others disagree. Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce – the region that lies at the heart of the UK offshore industry – says the UK needs a managed and nuanced transition to low-carbon energy.

“The New Zealand experience is a salutary lesson in why it’s so important to devise a better approach to energy policy,” he says.

“Oil and gas will still make up 50 per cent of our energy requirements by the mid 2030s and will even provide over 20 per cent of our energy as we reach net zero by 2050.”

The UK should prioritise the North Sea as long as it needs oil and gas, believes Brendan Long, an energy analyst with WH Ireland Capital Markets.

“The resources of the UK can be produced with lower emissions than elsewhere in the world – reflecting the engineering acuity of the UK’s energy industry and their willingness to invest in low carbon strategies.”

New Zealand’s experience suggests much of the UK industry would not survive a ban on new drilling.

“Back in 2018, at the time of the ban, there were 20 international and five local companies engaged in exploration and production in New Zealand,” says John Carnegie, chief executive of Energy Resources Aotearoa, the local industry trade body.

“Since then, exploration has fallen dramatically. We only have nine remaining investors, seven international and two local. The rest have left.”

The same may already be happening in the UK. Offshore operators such as Serica, Harbour and Deltic have announced that the “chilling effect” of Labour’s pledges was prompting them to move their investments abroad.

Robin Allan, chairman of Brindex, which represents the UK’s independent offshore companies, says: “New Zealand’s ban was a politically motivated decision which ignored data on oil and gas demand, the advantages of domestic production and a realistic pace of decarbonisation.

“The Labour Party should see what is happening in front of their eyes in another island nation which has already implemented a poorly reasoned policy – and think again.”

A Labour spokesman said the UK would do better than New Zealand.

“Unlike this [current, Conservative] Government, we will have a proper plan to take advantage of our North Sea resources in carbon capture, hydrogen and offshore wind, to deliver for our coastal communities and workers.

“Labour’s plan to make the UK a clean energy superpower will reduce the UK’s dependence on imported energy, as we increase the percentage of British renewable and nuclear power in our energy mix.”