The UK's post-Brexit future in oil and gas
The United Kingdom’s oil and gas sector stands ready to benefit from Brexit, along with our rediscovered freedom to trade globally. It is imperative we Get Britain Out of the EU without delay so we can avail ourselves of a more vibrant economy
The United Kingdom’s oil and gas sector has been one of our most formidable industries since the 1980’s, and it stands ready to benefit from Brexit.
The sector is often seen as an older, declining industry, but, with careful management, it can be reinvigorated. Not only can it continue to grow and secure British jobs, it can be a key building block for the UK’s post Brexit success.
The UK does £73 billion worth of oil and gas related trade with the rest of the world. As a Member of the European Union, tariff costs for the UK’s oil and gas sector are around £600 million per year.
Free trade deals after a No Deal Brexit, would reduce tariff costs to zero with our trading partners. The likelihood of arranging free trade deals, with oil and gas as leverage, is particularly high due to the vice like grip and control the Organization of Oil Exporting Countries (OPEC) has on oil prices.
Britain has the advantage of being able to trade in oil and gas, independent of OPEC’s control and within independent free trade deals. We can offer lower prices and more flexibility to our trading partners, which makes the UK a more appealing trading partner for the nations of the world.
According to Ernst and Young’s Annual Report in February 2019, only 4% of attendees from the UK Oilfield Services who participated in a poll said Brexit was the biggest barrier to growth.
Remainers and Project Fear would have us believe Brexit can only be detrimental. However, the poll found the greatest impediment to growth was industry behaviour and culture, with 39% of the vote. In 2017/2018 oil companies British Petroleum, Total SA, Royal Dutch Shell and the Norwegian State-backed energy company Equinor, all approved long-term projects in the North Sea or around the UK’s coast line.
Brexit did not deter these decisions, in fact, it has increased investment. Brexit in any form, not even the optimal World Trade Organisation-terms, is beneficial for the sector.
Firstly, by leaving the EU and entering the global market, the UK will no longer be limited by tariffs and restrictions on who we trade with.
By trading globally, the UK can be made more attractive for overseas investors, ensuring long term prosperity for the industry. This will ensure British jobs are preserved in the industry and secured for the future. Increased investment from overseas will result in more funding for coastal communities, which are dependent on the oil and gas sector.
Secondly, the UK’s move back to being an independent trading nation in oil and gas will be seamless. The 1998 Petroleum Act gave the Government full control over its energy policy, including licensing, and taxation of exploration and development over oil and gas reserves. Brexit will not affect the regulation or standards of the UK’s oil and gas sector, unlike other industries which are more susceptible to regulation changes.
The sector currently employs around 375,000 people in the UK, according to the Oil & Gas UK Trade Association. Project Fear would have us believe the greatest threat to the industry will come from the ending of the EU’s Free Movement of people policy and the resulting damage to the industry’s workforce.
However, EU nationals make up only 5% the workforce, with the vast majority in managerial positions in a salary bracket above the £30,000 threshold for entrants from the EU. Consequently, reduced growth from a lack of skilled labour is not an issue for the industry. After Brexit, the sector will continue to be able to attract the most talented individuals to ensure the sector’s growth.
Oil and gas are increasingly seen as industries of the past, with the emergence of various forms of renewable energy threatening the industry’s future. However, oil and gas remains the life blood of every economy on earth and the UK still has untapped oil and gas pockets which must be utilized.
Development of new technologies would allow the industry to maximise the recovery of 10-20 billion barrels of oil and gas within the UK Continental Shelf. This has a market value of approximately of $1.2 trillion at the current oil price per barrel of $63.83. Even over a large number of years, this represents a significant addition to UK GDP.
If we do not leave the EU, our global potential is greatly reduced. The future of the UK’s oil and gas sector, along with the hundreds of thousands of British workers involved in the industry, are dependent on our leaving of the EU.
The United Kingdom’s oil and gas sector stands ready to benefit from Brexit, along with our rediscovered freedom to trade globally. It is imperative we Get Britain Out of the EU without delay so we can avail ourselves of a more vibrant economy.
Joel Casement is a Research Executive at the cross-party, grassroots campaign Get Britain Out
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