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North Sea ‘uninvestable’ without stable taxes

Harbour Energy rig
Ministers have been told that the North Sea competes for investment

UK government ministers have been warned that failure to create a stable tax regime could leave the North Sea “uninvestable” and see the country squander a £450 billion opportunity.

Energy industry representatives have published new research showing how the domestic offshore energy market could grow to that scale by 2040.

Launched today by Offshore Energies UK,  2024 Business and Supply Chain Outlook report shows oil and gas projects could create £145bn for the UK’s supply chain. Wind farms around the UK could generate £260bn worth of work, hydrogen projects £25bn, and carbon capture and storage (CCS) technology could bring in £34bn.

Existing oil and gas supply chain already has 60%-80% of the capabilities needed to develop these new energy technologies, says the report.

But current policy and political rhetoric “present serious challenges to these firms’ ambitions to scale up and seize these opportunities.”

With the right conditions, the UK offshore energy sector could benefit from a global export market worth more than £1 trillion within the next 15 years – generating thousands of new jobs and billions in new revenue for the UK economy.

The report says success depends on harnessing the UK’s oil and gas heritage and attracting the private investment needed to maintain the UK’s existing energy industry and its highly skilled workforce.

To reap the benefits of a homegrown transition and unlock investment in the UK, OEUK is urging policymakers to introduce supportive policies and globally competitive taxes.

In a media briefing yesterday, Labour came in for particular comment as it is expected to form the next government and has signalled an end to new licences and an increase in the windfall tax from from 75% to 78%.

“We have uncertainty on future licensing policy,” said Ross Dornan, the OEUK’s marketing intelligence manager. “Labour policy, for example, is to end the issuing of new licences in the UK.

Sir Keir Starmer’s party has proposed further tax changes (pic: Terry Murden / DB Media Services)

“We’ve seen four tax regimes in two years and we’ve seen further changes proposed by Labour aimed at increasing the headline rate of tax and cutting allowances.

“I think this would really make the UK move towards being uninvestable, from a number of fronts.”

OEUK said it has held further meetings with Labour representatives but gave no indication that there would be changes to the party’s policy.

OEUK CEO David Whitehouse said: “The UK has a £450bn domestic energy opportunity that could transform the economy and support jobs – but warning lights are flashing.

David Whitehouse: there is a global race for investment

“Our report shows a homegrown energy transition can generate a £450bn domestic opportunity for UK firms by 2040 that could kickstart growth across the UK economy. But investors, firms and workers need stability, predictability and fair returns to build a low carbon future here and keep jobs in the UK.

“We are in a global race for investment, and UK energy companies need supportive long-term policies, a stable tax regime, and responsible rhetoric from all sides.

“Our journey to net zero and beyond depends on responsibly making the most of our oil and gas production, which is at record lows.

“We’re facing a situation where we must import energy that could have been produced here and where we must rely on supply chain companies that could have been based here. The UK’s world class oil and gas sector has reduced emissions by 24% since 2018 and we must build our low carbon future on this achievement.”

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