WITH the news on Friday that Ed Miliband, the Secretary for Energy Security and Net Zero, is about to approve the Jackdaw gas field off Aberdeen, the Great British Business Council’s latest paper, Premeditated Industrial Destruction? How the UK destroyed its industry and a plan to reverse this, couldn’t be better timed. It explains everything that the policy-makers surrounding Mr Miliband ought to know about UK oil and gas, but probably don’t.
The Jackdaw gas field was discovered over 20 years ago in 2005, approved in the summer of 2022 and was expected to be in production by 2025. However its development was delayed by the Finch Case ruling that new oil and gas developments must take Scope 3 emissions into consideration.
Scope 3 emissions include all upstream and downstream emissions from a product. Although measuring them may make sense to some, the UK continues to use gas for domestic heating, electricity production and industrial heat. Whether the gas comes from the Jackdaw site or is imported from Norway, the Scope 3 emissions will remain almost the same. If the gas is imported as Liquefied Natural Gas (LNG) from the US or Qatar, Scope 3 emissions will be much higher, as LNG requires energy to be purified, frozen to -161°C, cryogenically stored, transported in specially designed ships, and regasified. The Scope 3 emissions of this process are many multiples of UK gas production; the only difference is that the LNG emissions will be attributed to the US or Qatar, rather than the UK. The way the UN’s climate accounting works makes a mockery of any serious attempt to reduce carbon emissions, as the new paper explains in its first chapter.
Regardless of the absurdity of UN carbon-emission accounting, the Jackdaw site deserves approval. Or, in fact, reapproval, as it was granted the go-ahead in 2022 before the Finch Ruling called it back into question.
Situated 150 miles off Aberdeen in relatively shallow waters of only 78 metres, it is south-east of Shell’s Shearwater platform and will be tied back to this. Jackdaw is a gas-condensate field and is estimated to hold 38billion cubic metres, with a production capacity of around 5.7million cubic metres of gas per day. The Jackdaw site could make a significant contribution to UK domestic gas supplies, provided, of course, Ed Miliband approves it.
Many activists are claiming that the UK should leave its oil and gas resources in the ground, but this makes sense only if other countries are willing and able to sell us their gas resources at a price we can afford. Right now, there is a perfect storm in gas supplies that will quickly turn into a price storm.
The Middle East conflict has again made energy security front-page news. Iranian attacks have damaged Qatari LNG production at Ras Laffan, the world’s largest LNG complex, which exports about 20 per cent of Global LNG supplies. Few in the UK have heard about Tropical Cyclone Narelle, which hit north-western Australia on March 26, damaging the country’s main LNG production and closing ports.
Australia produces almost 20 per cent of global LNG and is the third largest LNG exporter after the US and Qatar. Qatar and Australia together provide about 40 per cent of global LNG, and like Qatar, most of Australia’s LNG exports go to Asia: predominantly Japan, China, South Korea and Taiwan. The cyclonic disruption has mainly affected Chevron’s Gorgon and Wheatstone plants and Woodside’s North West Shelf Karratha plant, which together provide 8 per cent of global LNG supply.
The disruption in both Qatari and Australian LNG production will intensify competition for flexible cargoes, as Asian buyers bid against the UK and the EU for non-Australian and non-Qatari LNG. While this may not disrupt UK supplies, it has definitely increased the price the UK will have to pay for the 20 per cent of its gas that it imports from the US as LNG.
To add to the UK’s energy insecurity and its trade deficit, Norway is due to reduce its gas exports by a third during the summer of 2026 while it carries out major maintenance work on its pipeline and processing facility. Norway will cut exports by 50million cubic metres/day from April to June and 75million m3/day from August to September. These cuts will be spread across exports to both the EU and the UK; however, the UK should expect about a third of the reductions, as a third of Norway’s combined UK and EU gas exports go to the UK. Norway supplies about three-quarters of UK gas imports.
It is often claimed that if the UK produced more gas domestically, it would just be ‘exported to the highest bidder’. However, the UK does not have the facilities to convert natural gas into LNG; it can export gas only to countries connected to it by pipeline: currently just Ireland, Denmark and the Netherlands. Additionally, the UK’s lack of gas storage also ensures that the ‘highest bidder’ for UK North Sea gas will be the UK.
Converting gas to LNG requires specialist equipment and is a very expensive process, so it is financially viable only if the natural gas is relatively cheap. Unless the UK increases its gas production as dramatically as the US did after its shale gas revolution, thus lowering US natural gas prices by a quarter, it is unlikely that the UK will ever be a commercially viable place to spend about $6billion to build an LNG plant, as Norway and Russia have done. Building an LNG plant would have been an exceptionally risky investment under the current and previous governments, which did everything possible to discourage greater UK oil and gas production.
Before the recent conflict in the Persian Gulf, US LNG was about the same price as UK natural gas, so the UK was not importing ‘expensive’ gas when it imported LNG. However, importing natural gas from Norway or LNG from the US does incur a massive opportunity cost, as the UK misses out on tax revenues, high-paying jobs, and a lower trade deficit.
The taxes on oil and gas company profits are more than three times those of other UK companies, and oil and gas companies have fewer allowances than other companies. Should a company be lucky enough to find oil and/or gas in the North Sea, it must pay a ring-fenced corporation tax of 30 per cent and an additional Supplementary Charge of 10 per cent, and finally a Windfall Tax (the Energy Profits Levy) of 38 per cent, taking their total tax rate to 78 per cent.
The UK government would make more money from North Sea oil and gas than the companies that do all the work and make major investments in exploration, plant and equipment. However, with tax rates so high and restrictions on new wells so tight, most companies operating on the UK side of the North Sea are closing down, reducing production, or moving their rigs to the Norwegian side.
As a consequence, the OBR’s March estimate of revenues from all three oil and gas company taxes mentioned above is £200million in 2028/9 dropping to just £100million in 2029/30, In 2023/3, before the windfall tax was introduced, the Government raised £9.9billion in oil and gas tax revenues, and this figure does not include the many licence fees and levies it also charges.
To put that into perspective: Norway collected NOK 373.1billion in oil and gas taxes in 2025, equivalent to around £28.8billion, while the UK raised just £4.4billion in 2024/25. If we include Norway’s States Direct Financial Interest (SDFI) income, environment fees, and Equinor dividends, the total net Norwegian government petroleum cash flow in 2025 was NOK 655.8billion (£50.7billion).
The UK needs to copy Norway: encourage domestic oil and gas production, which will improve UK energy security, lower the UK’s trade deficit and increase high-paid regional employment.
To do this, the government needs to remove the windfall tax, restore the tax allowance for exploration and production expenses and invest in the UK’s resources. Miliband has established GB ENERGY – buying shares in new oil and gas licences or in the companies developing them would be a worthwhile GB Energy investment.
