Politicians in Scotland have been urged to roll back on policies deemed hostile to the oil and gas sector as Holyrood prepares to deliver a revised energy strategy.
Aberdeen and Grampian Chamber of Commerce (AGCC) pointed to the recent confirmation about the closure of Grangemouth refinery, alongside a devastating report from analysts Wood Mackenzie, which should be grounds for “focusing minds’” at the Scottish Government.
Expecting the completion of the SNP-led government’s latest energy strategy and just transition plan in coming days, AGCC issued a final plea for the terminology around a “presumption against” new oil and gas to scrapped.
UK policies ‘fatal’
The business group, which has 1,300 members of which a third are in the energy sector, said the Scottish Government has a “major part to play” in supporting confidence in the sector despite most aspects of oil and gas policy being reserved to Westminster.
AGCC has also been leading the charge against the UK Government’s plans to extend the Energy Profits Levy (EPL) and scrap investment allowances, policies which are expected to be confirmed in the Labour Government’s first budget 30 October.
The WoodMac report, which was issued Thursday, warned the policies would render the North Sea industry as “fatally wounded” in five years if the Labour government presses ahead with its fiscal plans.
Highlighting that 90% of cash flow generated in the UKCS until 2030 is from just 10 companies, the analysts warned that there would be an “immediate and deep” cut in investment – estimated to be worth £19billion.
As a result, oil and gas production would be cut in half and would “all but eliminate industry cash flows by the 2030s”.
Presumption against
The Scottish Government’s strategy was first published in January 2023. The energy sector was fiercely critical of the tone set by Nicola Sturgeon’s government when the strategy was unveiled.
However, now under new leadership, John Swinney’s government has hinted at a more pragmatic approach which would support new exploration licences if certain climate compatibility or energy security tests are met.
© Supplied by AGCCAGCC chief executive Russell Borthwick said: “While industry makes the case for a commonsense fiscal approach to restore confidence in the North Sea, the Scottish Government also has a major part to play.
“Although the main levers over energy sit with Westminster, the tone set by Holyrood matters to investors.
“There is no doubt that the wrong-headed ‘presumption against’ new oil and gas contained in the draft version of Scotland’s energy strategy only served to create more uncertainty while windfall taxes cut the sector off at its knees.
“A Scottish Government under new leadership has a real opportunity in the coming days as it publishes its revised strategy – to back our energy sector to the hilt, to show the world Scotland’s door is open to investment and to protect jobs through the energy transition.
“This week’s news about Grangemouth should focus minds at Holyrood. The loss of those jobs, while significant, is just a tiny fraction of what’s to come if governments across the UK don’t change course in relation to oil and gas.
“Our message is clear: ditch the presumption against new oil and gas, follow Norway’s lead on energy security and economic stability, and unlock Scotland’s huge potential.”
