UK Budget Signals Wave of New North Sea Oil and Gas Drilling

John Healey’s Budget has assumed the government will approve North Sea discovery drilling projects that produce in excess of a billion barrels of oil and gas, in the clearest sign yet that ministers plan to rubber-stamp a wave of new drilling after Jackdaw and Rosebank.In its scorecard for the Chancellor’s maiden fiscal event, the Office for Budget Responsibility accounted for a boost in tax receipts from the “development of new fields” that not only include the controversial Rosebank oil field but also other “future discoveries”.The fiscal watchdog used North Sea Transition Authority (NSTA) estimates that assume the government will green light the extraction of all the North Sea’s so-called ‘prospective resources’ – the regulator’s best guess of untapped reserves available in current licences.Any approvals would not be in breach of the government’s 2024 manifesto promise to ban new drilling licences in the North Sea. But they would represent a major softening of its stance to the UK’s energy reserves on top of the recent approval of Jackdaw and potential sanctioning of the larger Rosebank project.The two major oil and gas fields had been held up in a lengthy court battle for several years, before energy secretary Miatta Fahnbulleh greenlit Jackdaw – the less controversial of the two sites – last week. The minister said the project would “support the country’s energy security with homegrown gas”.Burnham vows ‘pragmatic’ North SeaA decision on Rosebank, which is more contentious as it consists almost entirely of oil, is now also on her desk, but has not been approved despite the Treasury costing for it in the Budget. Both projects were subject to a lengthy consultation that both Fahnulleh and Andy Burnham have branded “quasi-judicial”.City AM understands that energy companies seeking to drill for new discoveries would have to go through similar hurdles to those navigated by Adura – the owner of Rosebank and Jackdaw – to get government and regulator approval.According to the NSTA’s latest estimates, there are roughly 1.2bn barrels of oil and gas equivalent that fall under its definition of prospective resources, meaning the OBR is accounting for a major acceleration in drilling.The fiscal watchdog said it anticipated oil and gas production to slow at a rate of roughly 10 per cent a year between 2027 and 2031, assuming the development of new fields. But it warned the annual pace of decline would fall to as much as 14 per cent were there to be no production from licensed new fields.The fact OBR officials priced in the extraction means the government could face a multibillion-pound hole in the public finances should it fail to approve new fields at the rate the watchdog expects.A Treasury spokesperson said: “The OBR makes assumptions about future North Sea production when forecasting tax revenues, and Rosebank has been included in government forecasts since at least 2019. This is entirely separate from the Energy Secretary’s independent decision on the project, which will be made through the quasi-judicial process, taking into account all relevant factors in the case.”By City AMMore Top Reads From Oilprice.comInvestors From 119 Countries Pile Into Dangote’s Record Refinery IPOU.S. Lawmakers Warn Banks Against Trump's Russian Diesel DealIran Eyes $130 Oil While at Least 50 Tankers Sit Stuck in the Gulf