Offshore energy chief urges talks not taxes

The acting CEO of the UK’s offshore energy trade body has urged new UK Prime Minister Liz Truss to collaborate with the energy industry to solve the growing crisis rather than looking to implement a new windfall tax.

Speaking as Offshore Energies UK (OEUK) CEO issued its new economic outlook report, Mike Tholen warned a move to create more windfall taxes would drive investment away leaving vital stocks of oil and gas unable to be accessed.

The organisation said the new Prime Minister will need to balance the short term challenge of helping families pay their bills with the longer term challenge of keeping the lights on while tackling the climate emergency.

“There is enough oil and gas in the UK continental shelf to power the UK into the 2040s and fuel the transition to renewables,” it added. “OEUK stands ready to work closely with the new prime ministerial team in number 10 Downing Street and with the Chancellor. OEUK has written to the PM to propose a new summit for ministers and energy producers to help plan the way ahead.”

Tholen added: “We welcome Liz Truss to her new role and wish her all the very best in challenging times.  A big prime ministerial inbox awaits, on top of which sits UK energy security and its critical place in countering the threat from Putin’s weaponisation of energy.  As the new PM has said, we need to find a two-pronged solution both in the short- and long-term to the energy crisis.”

“The world is plunging deeper into a global energy crisis, rooted in Putin’s horrific invasion of Ukraine and the faster than anticipated economic recovery from Covid-19,” he explained. “As we are seeing, the UK is not immune to the effects. There are critical concerns over energy supplies and the price of gas and power for the coming years. Having a sustainable, secure, and affordable supply of energy has never been more important and the UK’s offshore energy sector continues to step up and play a vital role in ensuring this.

“The first six months of the year saw UK gas producers boost supplies by 27% relative to the same period in 2021, meaning the equivalent of an additional 3.5 million homes are benefiting from energy produced domestically. By doing this the UK has been able to wean itself off Russian imported fuels, breaking energy links with a country at war with a UK ally.”

“The UK needs secure and reliable energy to power and heat our homes, to fuel our industries and to run our cars, planes and trains,” Tholen said. “It’s at the centre of almost everything we use and do in our everyday lives. And the reality is that without oil and gas these systems would grind to a halt. Gas provides 85% of our home heating and it makes our power system work by bringing the flexibility required to meet over 40% of our electricity needs, on average, and much more at peak times. And oil fuels 95% of our transport needs. We can’t take these contributions for granted, but supply is becoming less affordable and more complex.”

Turning to the threat of taxation on profits Tholen cautioned that a short term funding fix may create a long term supply threat impacting the UK’s efforts to enhance its energy security.

“Renewed support for consumers will be needed, over and above that which is already being funded by the oil and gas sector’s taxes,” he said. “We also need to see reform of the electricity market to ensure that falling cost of renewable power is passed on to consumers.”

“Commitment is needed to end the windfall tax by 2025, at the latest, and to work with the sector to rebuild investor trust,” Tholen continued. This will help ensure companies have the confidence to invest in developing our future, lower-carbon, energy resources. Anew oil and gas licensing round is needed to help develop our untapped potential, and a refreshed commitment to the quid pro quo nature of the North Sea Transition Deal (the Deal) would give assurances that the UK wants to deliver a managed transition that doesn’t place a heavier burden on consumers, but instead protects energy security and slashes emissions.”

He concluded: “We can’t afford to see any more moves like the windfall tax, which damages the UK’s reputation as a safe place to invest. With the development of the right conditions, we can attract the capital required to unlock our oil and gas resources and manage their output in line with changes in our demand profile. And through joined up and collaborative working we can up the pace of offshore wind developments and get moving with the shovel-ready hydrogen production and carbon capture and storage projects that will be delivered by companies driving the energy transition, while continuing to provide much needed and secure supplies of oil and gas.

“This is the energy transition in action. Given the urgency of the energy crisis, it’s time to work together to greatly accelerate its delivery.”