The UK North Sea is “uninvestable” due to the windfall taxes and rhetoric from the Labour Party that they will make the regime even tougher.
Colin Welsh, a partner in SCF Partners, said oil and gas firms have stopped investing in their North Sea assets because they can’t make a reasonable return on investment and there is no confidence that a supportive regime will return.
Meanwhile, independents like Harbour (LON: HBR), Ithaca (LON: ITH) and Enquest (LON: ENQ) – that have been filling a gap that has largely been vacated by the major oil companies – are being “unfairly punished” by the windfall tax.
The Energy Profits Levy has impacted smaller players much more than the supermajors who now derive the bulk of their profits in other regions and pay most of their taxes overseas, he added.
‘Stalinist’ tax has undermined confidence
He said: “The UK is at a tipping point – there is no appetite to invest in the UK oil and gas industry just now because it’s such an unstable environment.
“The windfall tax grab was a Stalinist thing for the Conservatives to do – it has completely undermined investor confidence.”
Speaking at a recent event in Aberdeen, Welsh said oil and gas services firms are in a “fantastic” position to transfer the skills of their workforces to the transition to clean energy activities.
However the UK’s ability to meet net zero targets would come under pressure due to lack of government and industry funding.
“If we continue to follow the current path there will be a drag on energy transition progress because the oil industry provides much of the capital and expertise to the accelerate the transition,” he said.
“We won’t have an oil and gas industry to sponsor and finance the transition unless things change dramatically.”
Investment
Houston-headquartered SCF Partners have spent 40 years investing billions of dollars into energy companies worldwide.
Their portfolio currently includes Aberdeen companies Centurion, Score, Hydrasun, and Global E&C. The firm recently combined a number of these companies to create D2Zero, a platform aimed at helping customers across a range of industries to decarbonise their operations alongside its legacy oil and gas service activities.
“We are using the legacy profits to invest in the transition, both organically and through acquisition,” he said.
“People in the UK want cheap energy, clean energy and reliable energy. Unfortunately if there is not a major change of direction we won’t achieve any of these things”.
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