Burnham has hinted he could be open-minded about North Sea production, while sticking to a broader decarbonisation agenda, writes Lucas Waelbroeck Boix
The appointment of Andy Burnham as the UK's new prime minister is not expected to significantly shift the country's course on decarbonisation and the future of its oil and gas drilling in the North Sea, despite mounting pressure from lobby groups and unions supporting the new leader.
Burnham took office as prime minister on 20 July after being the only candidate seeking to replace Keir Starmer, who announced his resignation on 22 June. The ensuing cabinet reshuffle saw former defence minister John Healey taking over the Treasury and Miatta Fahnbulleh appointed as energy minister, replacing Ed Miliband who became foreign secretary.
The new prime minister is yet to provide much detail about the policies he intends to pursue in office, but in the energy field he is unlikely to steer sharply away from his predecessor's course. Burnham has pledged to stick to Labour's 2024 election manifesto, which includes commitments to not issue fresh licences to explore new fields and to ban fracking. But in an interview with UK broadcaster the BBC in May, he hinted he could be open-minded about North Sea production, while sticking to a broader decarbonisation agenda. "I am listening to what people are saying about that," he said. "But I don't think it's in our interest to focus on time-limited industries."
Ahead of Starmer's resignation, the UK was poised to introduce an Energy Independence Bill, which would permanently ban new exploration licences in the North Sea but allow firms to produce gas from areas adjacent to licensed blocks under proposed Transitional Energy Certificates. The aim of the new system is to maximise output from existing offshore fields. "Issuing new licences to explore new fields cannot give us energy security and will not take a penny off bills," a government spokesperson told Argus last week. "Oil and gas production will be with us for decades to come and we will manage existing fields for the entirety of their lifespan while actively scaling up clean energy industries in the North Sea," the spokesperson said.
Fahnbulleh had previously served under Starmer in the more junior role of parliamentary undersecretary of state for devolution, faith and communities, but was the first minister to resign in the aftermath of the local elections in May this year, which yielded a disastrous result for the Labour party and ultimately led to Starmer's decision to resign. She leans on the left of the Labour party and favours strong decarbonisation policies, with her parliamentary record showing she voted in favour of the Energy Profits Levy windfall tax on North Sea oil and gas firms, and in favour of measures to combat climate change.
Rough seas
A joint report by think-tank the New Economics Foundation (NEF) and climate activist group Friends of the Earth — issued in 2021 when Fahnbulleh was NEF chief executive — concluded that the government "must immediately end support for new fossil fuel extraction projects, both at home and abroad". The report included calls for the government to cancel all future North Sea licensing rounds, revoke all undeveloped licences and reject new development consent applications.
The future of oil and gas drilling in the North Sea has been a controversial policy issue for the Starmer government, particularly following the outbreak of the war in Iran, which reignited energy security concerns.
The new prime minister faces pressure from several groups — including Labour-friendly unions GMB and Unite, alongside energy industry association Offshore Energies UK (OEUK) — arguing in favour of homegrown energy sources to reduce reliance on imports and support domestic industries. "Increasing our reliance on imported energy from overseas… leaves us worryingly exposed," GMB union general secretary Gary Smith said on 14 July. "We fully support the government's ambition to build a secure, lower-carbon energy system, but energy transition must follow an all-energy approach," OEUK chief executive David Whitehouse told Argus, adding that North Sea production is not just a commitment to homegrown energy but also a commitment to UK manufacturing.
While the new cabinet appears unlikely to reverse a manifesto pledge without first facing a general election, it may consider giving approval to the development of two fields that have been stuck in a limbo since Labour took office in 2024 — the Rosebank oil and gas field and the Shell-operated Jackdaw gas project. The previous Conservative government approved both fields ahead of the last election, with proponents arguing that both could go ahead without breaching the Labour commitment.
The Jackdaw field in the North Sea was originally expected to start up in the second half of 2025 and reach peak production this year of 4.85mn m³/d of gas alongside 7,500 b/d of condensate. But its timeline has slipped by at least one year and is still subject to regulatory approvals. The Rosebank oil and gas field, located west of the Shetland Islands, is estimated to hold around 300mn bl of oil equivalent, most of which is crude oil. Norwegian state-controlled Equinor, the majority stakeholder in the field, started drilling at the end of the first quarter, targeting seven wells over 18 months. But drilling halted in April because of a fault with the rig that will take 3-4 months to fix, the company said in May.
The two projects may be approved as part of a compromise with unions and the industry rather than a full policy reversal. In March, Unite had called for the government to "stop blocking oil and gas production in the North Sea" and to immediately give the go-ahead for Rosebank and Jackdaw. The union's position on the issue has not changed, even though a reversal of the oil and gas ban did not feature in its list of demands that was part of its conditional nomination of Burnham, Unite told Argus. The Offshore Petroleum Regulator for Environment and Decommissioning launched a public consultation on Jackdaw earlier this month, which runs until 10 August. Further consultation will also be required on Rosebank after its environmental impact assessment is reviewed on 23 July.
In any event, the impact of the two projects may be largely symbolic. And in the unlikely event of a policy U-turn on North Sea exploration, a reversal of the region's production decline is unlikely to be achieved easily. Production from the UK offshore is in long-term decline, with government officials describing it as a mature basin. UK offshore production fell to 77.7mn m³/d last year from 80.3mn m³/d in 2024 and is expected to plunge to 58.4mn m³/d this year, according to recent forecasts from the North Sea Transition Authority.
The Burnham question
In the near-term, Burnham is more likely to focus on measures aimed at lowering retail energy prices and bringing the energy industry under more public control.
In his first day in office, Burnham scrapped the 5pc value-added tax on household electricity bills from 1 October, in a bid to reduce costs for households. The government expects the cut to take around £45/yr ($60/yr) off the October energy price cap, on top of the £150 removed from bills at the last budget. The cut follows the Starmer government's move earlier in the year aimed at delinking gas and power prices by extending long-term fixed-price contracts to low-carbon generators not already on contracts for difference. Fahnbulleh and Burnham align in their belief that the state should expand its control through tougher regulation and greater public ownership of basic needs such as electricity, gas and water.
