Westminster has been making more and more noise about boosting the UK’s reliance on its homegrown energy from the North Sea, including oil, gas, offshore wind and hydrogen, as well as new carbon capture technologies.
More specifically, the recent Spring Budget pitched billions of pounds of private investment in the UK energy sector, with the hope of encouraging investment, growth, job creation and emissions cuts. Decisions made now will be critical to the long-term success of the UK’s transition to a cleaner economy, maintaining energy security and supporting 200,000 jobs across the country.
The North Sea alone could power the UK for decades, but a mix of windfall taxes and political uncertainty is driving away the billions of pounds of investments needed to maintain oil and gas production now and create low-carbon energy in the future, according to Offshore Energies UK (OEUK), a trade association for the UK offshore energy industry.
Today, 76% of the UK’s energy needs are met by oil and gas, and these fossil fuels will remain a key part of the UK energy mix for decades to come.
Currently, businesses are being deterred from investing in the UK by the windfall tax and uncertainty – more than 90% of OEUK operator members are cutting back investment. This undermines UK energy security, 200,000 skilled jobs in the sector, and the skills and people necessary for a successful transition.
“We have been calling for some time for new measures to turbocharge investment in clean energy that maintains energy security, as the US and other countries are doing, which we have no time to waste on,” said David Whitehouse, CEO of OEUK. “Windfall taxes have damaged the confidence of companies to invest in the long-term energy security of the UK, which relies on oil and gas for 76% of its energy. When prices drop, it is fair that the windfall tax should fall away.”
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The UK spent £117bn ($144.1bn) on imported oil and gas in 2022. If the lack of investment is not addressed, the UK will continue to see imports of oil and gas increase, with value lost to the UK economy and skilled jobs exported overseas.
The Office for Budget Responsibility forecasts the UK’s transition to net zero will cost £1.4trn, the majority of which needs to come from private company investment.
To unlock that capital, OEUK has said it is vital that the government offers investors fiscal predictability and regulatory certainty to make the UK an attractive place to invest for the long term. The government must take a far-sighted approach focused on reducing investment risk if the country is to build a secure, affordable, low-carbon energy market in the UK while maintaining energy security.
“Oil and gas will play an important part in the UK’s energy needs,” said Whitehouse. “A successful energy transition needs to attract investment in our domestic oil and gas sector. If not, UK energy import bills exceeding £100bn will become a regular event – that is money flowing out of UK homes and businesses to support the jobs, industries and economies of other countries. The whole of the UK will be all the poorer for it.”