100 Days to Save North Sea Oil

27/05/2024
Photo by Zukiman Mohamad: https://www.pexels.com/photo/offshore-drilling-rig-on-body-of-water-87236/

The next UK government will have just 100 days to save 100,000 jobs in the North Sea energy sector as companies consider pulling investment from the UK.

The 39th Energy Transition report from Aberdeen & Grampian Chamber of Commerce reveals there has been a sharp decline in work across production, exploration and renewables as investors await the outcome of the General Election.

Industry confidence in UK activities has plunged to a record low, according to the long-running survey, with high taxes and a potential exploration ban threatening to bring our world class domestic oil and gas industry to a premature end.

With a leading investment bank warning that up to half of the direct and indirect jobs supported by the North Sea could be lost inside just five years, the Chamber estimates that the party which wins the election has 100 days to restore confidence or face losing investment worth £30billion.

The Chamber is also making fresh calls for an independent body, free from political influence, to oversee the energy transition.

Like the Bank of England – which has maintaining monetary and fiscal stability as its central mission – the new body should be charged with developing recommendations which could command cross-party consensus and insulate the sector from policy shocks in the future.

The report also calls for a “relentless focus” on renewable energy job creation, echoing calls from union Unite for major investment to create jobs in wind power manufacturing and operations, hydrogen, carbon capture and decommissioning.

Published today, the Energy Transition survey sponsored by KPMG and ETZ Ltd shows that companies expect only around half of their work (51%) to be in renewables by 2030 up from 34% currently, although headwinds remain.

The 39th edition also finds:

  • Despite the oil price remaining over $80 a barrel, confidence among companies working in the UKCS is now lower than the financial crash and the pandemic when oil prices had slumped to around $16 a barrel.
  • Tax, political environment and market stability are the three biggest concerns facing companies based in the UK energy sector.
  • UK-based companies are increasingly focusing their investment and resources in overseas projects and markets.
  • Profitability and the regulatory environment are listed as the biggest barriers to diversification into renewable energy, with respondents expecting only 51% of their activities to be out with oil and gas by 2030.
  • More than two-thirds of energy sector companies (67%) believe that none of the UK’s political parties are putting forward the correct strategy for energy transition.
  • All companies are facing acute recruitment challenges, with half of firms losing more people than usual to retirement. A third are losing more staff than usual to overseas projects.

Russell Borthwick, chief executive at Aberdeen & Grampian Chamber of Commerce, said: “The Energy Transition survey has charted the highs and lows of the UK’s energy sector for the past 20 years, but never before have its findings been so important; and the need for action so urgent.

“From our survey and listening to focus groups, we believe the next government has just 100 days to convince industry that there is a future in the UK Continental Shelf.

“Failure to do so will result in the current apathy, which is evident throughout this report, turning to open revolt, where companies move their resources on to countries which offer a less hostile business environment and better returns. Privately, industry leaders are being very clear that this will be the outcome of an extended windfall tax with scaled back allowances.

“Should this transpire, our path to net zero could look more like a road to nowhere. A road that leaves the UK poorer, less energy secure, and beholden to foreign regimes for the energy we need to keep the lights on and our economy running.

“To set a different path – one where the UK seizes the huge economic opportunities of the energy transition – requires a diversity of thought and approach, and reflect the views of industry, academics and workers.

“We need a new body, free of political interference, to make the right decisions for the long-term future of our energy sector. I thought that was important before. I now believe it is essential.”

Maggie McGinlay, Chief Executive of ETZ Ltd, said: “ETZ Ltd is delighted to partner with Aberdeen & Grampian Chamber of Commerce and KPMG for this latest survey which underscores the need to deliver stable policy signals for investors to get on with the business of the energy transition. 

“We must supercharge our renewables revolution by cutting through the red tape around grid and planning which are clearly not incentivising the investment levels required in order to achieve this. 

“What is reassuring, however, is there is clearly still a strong appetite across our industry base to accelerate transition and that is reflected in ETZ Ltd’s ongoing support for the supply chain who are seeking to capitalise on the huge opportunities before us. 

“As we approach a General Election I would urge political debate to focus on the need for a joined-up industrial plan recognising the lasting, vital role the energy industry plays.  

“Whoever comes to power must see the transition as an unprecedented opportunity to support decarbonisation and lasting industrial and jobs benefits to communities across the North-east, Scotland and the wider UK.” 

Paula Holland, Office Senior Partner for KPMG in Aberdeen, said: “It is quite clear that political instability in an election year, ever changing tax policy, and uncertainty in the market understandably weigh very heavily on the minds of those who responded, outstripping concerns over the oil price for the first time. 

“This difficult climate is seen as a significant barrier to the speed of UK diversification to renewables and other low carbon sources of energy, something which is closely tied to the investment decisions being made in this region every day. 

“The findings show that the majority of companies remain optimistic about the long-term future of Aberdeen and its place on the world stage as a major energy hub.

“Overall, it’s clear that everyone just wants to know which way the wind will blow. Waiting is wasted time on the global stage though, which is why it’s critical that Aberdeen remains focussed on securing its prime position in the transition.”

The results of the survey will be launched at a Business Breakfast in Aberdeen this morning.

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