Budget watchdog will need to revisit figures if Rosebank refused, minister says
OBR will have to republish figures on state of UK economy if oil field is not granted approval, says peer
The budget watchdog will have to revisit its assessment of the UK economy if drilling for oil at Rosebank is not approved, an energy minister has said.
In the House of Lords, Baroness Curran said: “The OBR (Office for Budget Responsibility) will have to republish the figures if Rosebank does not go ahead and it will need to be addressed.”
She added that Energy Secretary Miatta Fahnbulleh will grant or refuse permission for the oilfield project “on the facts” of the case.
Unveiling his Budget on Wednesday, Chancellor John Healey said he wanted to “begin the radical reform of energy to reduce bills in the future”.
He pointed to a decision by Ms Fahnbulleh to approve gas production at the Jackdaw field, in the North Sea around 150 miles east of Aberdeen.
“This will protect hundreds of jobs and add an estimated £2.9 billion to the UK economy,” Mr Healey added, describing it as “a pragmatic, common-sense decision”.
The OBR’s economic and fiscal outlook, published alongside the Budget, forecasts the Government will raise £5.1 billion from oil and gas taxes in 2026-27.
This figure will fall to £1.9 billion by 2028-29 and then “close to zero” by 2031-32, once the windfall tax on oil and gas firms, known as the Energy Profits Levy, expires.
This projection includes production at existing fields and takes into account the North Sea Transition Authority’s estimate of production from new fields, such as Rosebank, and future discoveries.
The annual decline in production is expected to be around 10% per year between 2027 and 2031.
If no new fields are approved, including Rosebank, the rate of decline would speed up to around 14% per year.
OBR chairman Professor Jonathan Haskel has said that as a result of decline, the contribution of oil and gas to the Treasury in the near future will be “really small numbers”.
He told reporters: “The bottom line to all of that is that production in the North Sea is falling by so much that when oil and gas prices return in five years’ time – as I, as we, hope they will – to their current level, tax revenues from the North Sea will be tiny.”
He said this was a result of “the wearing out” of North Sea fossil fuel and the way it is “being depleted” over time.
Lady Curran told the Lords it was “normal for the Government’s future revenue forecasts to include both current and potential future oil and gas projects”.
She added: “This in no way reflects 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.”
Mr Healey, in his Budget speech, said Ms Fahnbulleh had “opposed” the Jackdaw project, before correcting himself with the word “approved”.
Conservative former minister Lord Harper said: “Didn’t the Chancellor really gave the game away yesterday when he referred to Jackdaw and accidentally let the truth out, which was that the Energy Secretary was ‘opposed’ to it, but the Prime Minister (Andy Burnham) and the Chancellor said yes?
“Isn’t that exactly what we’re going to see with the Rosebank decision?
“She’s against it, the Energy Secretary, but the Prime Minister and the Chancellor know it’s the right thing to do – that’s what the Government’s going to do.”
Lady Curran replied: “I have to say it is quasi-judicial and I can absolutely guarantee, because I know the Energy Secretary very well, she has not made the decision.
“She will make the decision on the facts and the Government will stand by that decision.”
Lord Moynihan, a shadow business minister, said approving the Jackdaw project was “practical, it’s really welcome, it adds to our energy security, and it produces revenue – all of which are equally applicable to Rosebank”.
Responding, Lady Curran said: “I’m under no illusions about what the Conservative Party’s view in this is.”
Lord Deben, the Conservative former environment secretary and ex-chairman of the Climate Change Committee, said: “I hope the (Energy Secretary) realises how important it is for Britain not to encourage other people to extend the exploitation of oil because we are fighting a battle against climate change, which is crucially important for our children and grandchildren.”
Lady Curran replied: “The Government is very clear that we are maintaining our commitment to get off the fossil fuel rollercoaster.”
She said the Government’s decisions so far had been “entirely consistent” with its “commitment to building clean energy”.
She continued: “We remain committed to understanding and explaining to the British people the threat of climate change and the way that it will impact in their lives.
“It is happening now – we need to adapt, we need to mitigate now and we need to get off the fossil fuel rollercoaster.”
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