New research has warned that the next UK government will have just 100 days to restore confidence to the North Sea energy sector and save 100,000 jobs.
According to the Aberdeen & Grampian Chamber of Commerce’s (AGCC’s) 39th Energy Transition report, optimism has been falling at companies working on the UK continental shelf.
The level of businesses predicting that revenue will be up (65%) was the lowest level since 2020. Only 56% of businesses felt their profits will increase in 2024, lower than in the previous survey.
The report predicted that confidence will worsen over a five-year horizon, expected to drop to -69%.
In addition, there has been a sharp decline in work across production, exploration and renewables as investors await the outcome of the General Election.
Businesses cited government policy as the most important factor influencing the level of business activity, continuing a trend from previous reports.
In particular, the energy profits levy (EPL) and the Scottish Government’s strategy continue to be major negative influences on the sector. A total of 75% of businesses had a negative opinion of the EPL, though this showed a slight decline from the 79% registered in the previous October 2023 report.
In addition, companies showed an 82% negative opinion of Labour’s proposed changes to the EPL.
The Scottish Government also scored a 75% negative opinion among the firms surveyed.
The AGCC warned that the declining confidence means companies could exit the UKCS under the tax regime being proposed by the Labour Party.
The body cited independent analysis from a leading investment bank which concluded that 100,000 of the 200,000 jobs currently supported by the UK North Sea oil and gas sector will be lost by 2029, with investment of up to £30 billion at risk.
Relentless focus
The report also called for a “relentless focus” on renewable energy job creation, echoing calls from union Unite for major investment to create jobs in wind power manufacturing and operations, hydrogen, carbon capture and decommissioning.
Companies expect only around half of their work (51%) to be in renewables by 2030 up from 34% currently, although headwinds remain.
Russell Borthwick, AGCC chief executive, said: “The Energy Transition 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 urgent.
“From our survey and listening to focus groups, 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 is evident throughout this report, turning to open revolt, where companies move their resources on to countries which offer a less hostile business environment and better returns. Privately, industry leaders are being very clear that this will be the outcome of an extended windfall tax with scaled back allowances.
“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, and reflect the views of industry, academics and workers.”
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