The UK will decide its next government today as industry leaders take the opportunity to urge Labour to unlock investment through policy.
Oil policy has shaped the debate around the general election with the Conservatives and Labour clashing on several policies, with tax being top of the agenda.
One policy in particular, the windfall tax, has proved to be a point of contention across the energy sector as Labour looks to “close loopholes” in the policy and increase the rate the oil firms pay.
Currently, there are investment incentives for oil and gas firms that encourage spending on UK projects, however, that is subject to change under Labour’s manifesto.
However, there is still uncertainty around what closing “loopholes” means in practical terms.
At the moment, oil firms in the UK pay a headline rate of tax of 75%, however, the party polled to come out on top today suggest bumping that up to 78%.
David Whitehouse, CEO of trade body Offshore Energies UK (OEUK) has pulled no punches in voicing his concern over the proposed policy as politicians took to the campaign trail.
The evening ahead of the opening of the polling stations Mr Whitehouse said: “Details matter. Labour Party policies, poorly managed and delivered without industry input, could spell chaos for employment in this industry at a time when there are already concerns about the economy.”
Norway ‘wouldn’t have succeeded at all’ without incentives
© Supplied by Kami Thomson / DC ThThis has drawn the attention of overseas markets as well, namely Norway which has a 78% rate of tax.
The difference between what Labour has proposed and what the UK’s Nordic cousin has had for years is investment incentives.
The former mayor of Stavanger and president of Offshore Europe’s sister event ONS, Leif Johan Sevland, told Energy Voice about the importance of such investments to his country’s energy sector success.
He said: “Those incentives, without them we wouldn’t have succeeded at all.
“There is a kind of flexibility in the Norwegian system, you’re paying high tax, but then you have a lot of incentives whatever you’re doing which makes for running in a good way.
“There’s no debate in Norway about that, it’s accepted, that’s the way it should be. I think the companies are living fairly good with it as well, I say fairly good because you should always complain about tax.”
‘Details matter’ says OEUK
© Supplied by OEUKIndustry has raised concerns that increased rates and reduced incentives to spend within the country’s water will drive firms overseas.
Ahead of its members casting votes, OEUK has sent out a letter warning that mismanaged energy policy leading to a lack of investor confidence will threaten the decarbonisation of the UK economy.
The UK has already seen projects delayed due to fiscal instability, namely NEO Energy’s Buchan redevelopment.
Initially planned to reach first oil by the fourth quarter of 2026, production is now set to kick off in “late 2027” as the project partners await “fiscal clarity from the next government”.
Viaro Energy’s CEO also told Energy Voice earlier in the year that the Anning and Somerville fields are “now on pause because of this, after a smooth and speedy process throug”.
Unlocking investment in decarbonisation
Over the past few weeks, OEUK has been championing a “homegrown energy transition.”
The group argued that this only be achieved with sustained investment in all aspects of the UK’s energy industry – including oil and gas.
Mr Sevland also explained that predictability of fiscal policy is of paramount importance to the success seen in Norway’s’ energy sector as it forges ahead worth oil and gas production while slashing emissions.
“As long as it’s predictable if you have an uncertain change, it’s the worst thing which could happen,” he argued.
“The Norwegian incentives are quite smart, we have been able to focus on innovation, research, new technology, which we are exporting around the world, the whole world.
“It’s also brought our CO2 emissions down to a record low level, compared with the rest of the world. So for us, it has been working well.
“For the UK, it’s up to the UK.”
The OEUK boss added: “Decarbonisation of the UK economy can be one of the greatest opportunities of our time, with the potential to create wealth across every community in the UK.”
Employment risk
© ShutterstockRisk to the employment of the UK’s highly skilled energy professionals is also something that has been raised as a potential consequence of an unstable fiscal environment.
Mr Whitehouse added: “Many of those working directly for producers and the wider supply chain are highly skilled.
“These people are mobile talent, and we need to keep them here or risk losing them to other countries, slowing down our transition at the benefit of others.”
“We have the future offshore energy industry right here on our doorsteps. From Newcastle to Cardiff to Aberdeen, these people deserve to be part of decisions impacting this industry.”
Energy Voice contacted Labour for a statement.
