Andy Burnham could unlock an additional £7billion of investment in the North Sea by adopting a more supportive approach to offshore oil and gas development, it has been claimed.
Energy consultancy firm Wood Mackenzie said a more favourable political and regulatory environment could encourage fresh investment while unlocking hundreds of millions of barrels of oil equivalent from the UK Continental Shelf.
The consultancy also suggested the sector’s future direction could depend on Mr Burnham’s choice of chancellor if he becomes prime minister.
In a client note, the consultancy said: “In an upside scenario, a more supportive political and regulatory framework combined with elevated prices could unlock an additional £7billion of investment and 740 million barrels of oil equivalent.”
The analysis comes after Mr Burnham indicated he is open to issuing new offshore drilling licences.
Ed Miliband is widely seen as the leading contender to replace Rachel Reeves as chancellor and has consistently opposed new oil and gas drilling in the North Sea.
The Energy Secretary has faced criticism from some ministerial colleagues over the pace of decisions relating to the Rosebank and Jackdaw oil and gas developments.
Final legal approval for both projects remains the responsibility of Mr Miliband’s department.
If Mr Miliband is appointed chancellor, his approach to energy policy could play a significant role in determining the future direction of the North Sea industry.
Secretary of State for Energy Security Ed Miliband could become the next Chancellor
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PAWood Mackenzie warned that maintaining a restrictive regulatory framework could lead operators to withdraw projects that have not yet received final approval.
The consultancy also suggested that additional revenues generated from North Sea production could help address an estimated £5billion gap in Labour’s defence spending commitments, reducing the need for alternative funding through higher taxes or spending cuts.
The North Sea has gone a full year without a single final investment decision, which Wood Mackenzie attributed to “four years of fiscal unpredictability” following repeated changes to the sector’s tax regime.
Rachel Reeves introduced a further levy on North Sea producers in May, with the additional revenue used to fund VAT reductions on family leisure activities.
Presently, new North Sea licences are banned | PA
The consultancy also highlighted the changing landscape of the UK offshore sector, with the number of operators active in the North Sea falling from 77 to 34 over the past decade.
Toby Fulton of Wood Mackenzie said: “The UK North Sea has gone a full year without a single new project investment decision, but the conditions underneath are shifting in ways that matter.”
Norwegian energy company Equinor has recently announced plans to invest $1billion in three drilling rigs to support expanded operations in UK waters.
However, Wood Mackenzie said future Government decisions will be critical to determining whether investment returns to the basin.
The consultancy said: “In a downside scenario, an uncompromising regulatory approach to platform electrification could cause operators to pull back from pre-sanction projects, resulting in £11billion in foregone investment, 400 million in lost reserves and production falling below 500,000 barrels per day equivalent by the mid-2030s.”
Labour’s approach to North Sea oil and gas has attracted criticism from Reform UK, the Conservatives, former Labour prime ministers and trade union leaders.
Wood Mackenzie said a number of independent producers have continued developing project pipelines and could move forward with investment quickly if the political and regulatory environment becomes more supportive.