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Soundbites in search of an energy future

As we approach the General Election, you will not have to look too far to find an empty soundbite.

Regrettably, there are none more vacuous right now than the so-called “just transition”.

The UK and Scottish governments are committed to it. However, both are struggling to deliver the policies and pace we need to make it happen.

On the one hand, we have a UK government taxing the oil and gas sector to death with its Energy Profits Levy (EPL). This is triggering a state of inertia among global investors. And on the other, we have Scottish government planners struggling to keep up with the pace industry demands for green energy consents, particularly in offshore wind.

Together, they have left our energy industry with two deeply damaging paradoxes.

One, where the appetite for investing in green energy has never been higher. But getting planning consent and grid connection has never been harder.

And the second, where the need for domestic energy security has never been greater, yet we are careering down a path that will leave us more reliant upon other countries to provide the gas we need.

The Transocean Sedco 704 at sunset. Shutterstock / Navin Mistry

Tough times

The Chamber’s recent Energy Transition survey propelled this issue to front and centre for the election campaign. The 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 imperative.

It has been compiled through research and industry focus groups with operators, investors and supply chain companies.

Given where the energy industry is globally, it should have been an upbeat report. Higher energy prices would normally mean more investment in the North Sea. This should see profits, in turn, pouring into offshore wind and other renewables projects.

In theory, things should be better than ever. But confidence has fallen to an all-time low. Industry does not like what it sees, and is clearly fearful of what potentially lies ahead.

From a policy point of view, it should not be complicated. Slow the decline of the North Sea with a fiscal regime that encourages investment and protects jobs, while at the same time building out renewables at pace, with a laser-focus on job creation.

Our survey shows that the exact opposite is happening. Investment is on hold and companies are haemorrhaging workers to other parts of the world or to premature retirement.

Undermining transition

We have been steadfast in our position that the windfall tax and proposals to halt North Sea drilling will undermine the energy transition. These will ultimately cost us the workforce and supply chain we will need to build out and operate our renewable energy infrastructure.

As the likelihood of a Labour government increases day-by-day, there is now a growing consensus around this view.

Investment analysts believe that Sir Keir Starmer’s plans will wipe out 100,000 of 200,000 North Sea jobs by 2029. This will cost the UK £30 billion in investment and £20bn in lost tax receipts.

And unions have been vociferously opposed. Unite has said Labour will throw workers on the “scrapheap” with its “irresponsible” oil and gas policies.

This is now a big moment for Labour and will reveal who it is they are listening to. Is it the grafters of the North Sea with dirt under their fingernails, or the wine-bar socialists with orange paint under theirs? We will soon find out.

Diversity of thought

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 was evident throughout our survey, turning to open revolt. Companies will move to countries that offer better returns.

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, not more politics.

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.

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