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UK Opts to Maximize Offshore Oil Production Over Onshore Wind

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May 27, 2015

By Alex Morales

(Bloomberg) — The U.K. aims to maximize domestic oil and gas production and curb the spread of onshore wind farms as the government leans toward maintaining energy security over cutting carbon emissions.

The measures form part of an Energy Bill announced by Queen Elizabeth II in a speech to Parliament in London on Wednesday that outlines the first legislative program of Prime Minister David Cameron’s majority Conservative government.

U.K. oil production was enough to meet about 56 percent of domestic demand last year, with a similar proportion for gas, according to the government. Even so, a drop in oil prices of more than 40 percent in the past year rendered as much as a third of U.K. fields uneconomic, BP Plc Chief Executive Officer Bob Dudley said in February. That’s led to government tax cuts to shore up the industry amid warnings that thousands of jobs may disappear.

“Given the right business conditions which promote investment, the U.K.’s oil and gas industry can continue to supply a significant proportion of our needs to 2020 and beyond,” the government said in a written statement. One of the main benefits of the bill is “maximizing the economic recovery of offshore oil and gas reserves, prolonging the life of the basin and helping to ensure our energy security.”

The draft law will outline plans to hand over powers to the Oil and Gas Authority from the government, allowing it to become an independent regulator of the industry.

Wind Farms

The bill will also cut the need for the energy secretary to approve onshore wind farms over 50 megawatts, in effect transferring consenting powers to local authorities in England and Wales. The changes won’t affect the planning process in Scotland and Northern Ireland’s devolved administrations.

“Singling out one of the most popular and lowest-cost forms of energy technology for different treatment in the planning system sends a worrying message to investors across the energy sector,” Maria McCaffery, chief executive officer of the RenewableUK lobby group, said in an e-mailed statement.

The Conservative Party pledged in its election manifesto to end subsidies to onshore wind farms, the cheapest form of large- scale renewable power. That promise will be delivered through separate changes to be announced soon by the energy department, according to the government statement.

Energy Bills

“The cost of substituting more expensive alternative technologies in place of onshore wind would needlessly add several hundred million pounds every year to energy bills,” Infinis Energy Plc Chairman Ian Marchant said in an e-mailed statement on behalf of the British Wind partnership, an alliance of independent generators.

The government said it will continue to push for emissions reductions in the power market. Ministers will also push for an “ambitious” global climate deal at a United Nations conference in Paris at the end of the year.

“We will continue to reform the electricity market to ensure the necessary investment is made to transition to a low carbon electricity system at the lowest cost to consumers,” the government said.

“If the government is serious about playing a leading role in the climate talks in Paris later this year then it must do more than offer warm words on climate change,” said the Green Party’s only lower-house lawmaker, Caroline Lucas. “Ministers must shelve plans for fracking and take action to invest in a renewable energy system fit for the 21st century.”

©2015 Bloomberg News

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