Over 40 energy supply chain companies have put their names raising “grave concern” over the UK energy policy and its risk to jobs and the energy transition.
The companies, all members of trade body Offshore Energies UK, issued the joint letter to Sarah Jones, Minister of State for Industry and Decarbonisation.
Sent ahead of the UK budget planned for 31 October, the firms back the idea that the rise in Energy Profits Levy (EPL), its extension to 2030 and the removal of the investment allowance and a reduction in capital allowances “risks thousands of jobs, and the companies critical to the UK Government’s industrial strategy and progress towards its net zero targets”.
© Supplied by DCT / Kenny ElrickThe letter added that signatories had “grave concern” that the tax proposals “would be a blunt response which could undermine the levers to long term solutions and jeopardise jobs in communities across the UK”.
The writers further urge the new government to demonstrate its commitment to working in partnership by inviting the sector to join the Industrial Strategy Council and Supply Chain Task Force.
The letter adds the firms are investing in “nascent opportunities like floating offshore wind and CCS” but currently rely on ” cashflow from a stable and predictable oil and gas business to fund these opportunities”.
It adds: “For our companies, this surprise risks operators – big and small – further scaling back or postponing their investment plans in response. The ramifications will be felt throughout the supply chain, through jobs, and the communities this industry supports, both directly and indirectly.
“Time is running out to get this right. The role of the sector and its supply chain companies must be recognised with representation on the industrial strategy council and the supply chain task force. It is vital that the new government demonstrates actual commitment to working in partnership with the sector to secure continued investment and to deliver on promises to safeguard jobs.”
David Whitehouse, chief executive of OEUK, said the signatories were not “household names” but are responsible for most of the estimated 200,000 jobs supported by the sector.
“The supply chain companies that I am representing here today are the ones that are taking the revenue from their oil and gas activity and they are powering that in their opportunities to drive longer term clean energy future.”
He said the UK government needed to fulfil its promise to “manage this sector in a way where we do not jeopardise jobs”.
He added: “The government recognises we will that we will need oil and gas for decades to come. We all want to see that acceleration of renewable energy – there is no argument.
“But while the country uses oil and gas, we must prioritise our own production. We must prioritise out own people, our own companies.”
OEUK said signatories include manufacturing, engineering and technology companies with a broad footprint of offices and workshops across the whole of UK, employing tens of thousands of people whose jobs depend on oil and gas, wind, hydrogen and carbon capture projects.
Signatories also range in size from some of the largest to the smallest firms in the energy sector supply chain. They include the likes of Martin Simmonite, senior vice president UK operations for Wood; Mike Pettigrew, group CEO, ASCO UK; and Nassima Brown, director, Fennex.
The letter in full
Dear Minister Jones,
We write on behalf of the UK offshore energy supply chain.
Our members share the vision and ambition of the Government on delivering a home-grown energy transition and net zero with potential to spend almost £200 billion over the decade. The majority of this could be spent in offshore wind, carbon capture and storage and hydrogen in the right investment environment. To deliver net zero, there needs to be an unprecedented amount of private investment unlocked. We remain convinced that the knowledge, experience, and capital our sector can bring to bear, in partnership with a pragmatic policy embedded in manifesto plans, will turn ambition into action and form a credible programme for government and the UK economy.
The demands on HM Treasury are and will continue to be significant. Historic debt, record high inflation, fluctuating strength in the pound, and challenging borrowing environments, means that the bedrock to success and delivering growth in the economy can only be collaboration between private and public capital. It will be essential to create an attractive and competitive environment through clear fiscal principles to give investors certainty to invest in the UK through to 2050 and beyond across the entire energy landscape. The reality of the transition is that we need both oil and gas and renewables in an integrated energy system.
In the search for solutions to the concerns surrounding the state of public finances, the need for long term thinking has never been greater.
We look at proposals to increase the EPL; extend its term; and reduce the rate of capital allowances with grave concern that these would be a blunt response which could undermine the levers to long term solutions and jeopardise jobs in communities across the UK.
The companies investing in nascent opportunities like floating offshore wind and CCS will require the cashflow from a stable and predictable oil and gas business to fund these opportunities.
Hundreds of companies at the heart of UK plc operate a multi-revenue approach, progressing oil and gas and renewable opportunities in tandem. This is not a coincidence, and this business model will be essential to the commercial and economic success of companies throughout the transition. Allowing us to maintain 200,000 jobs in the UK including 90,000 in Scotland. Policymakers understanding and supporting the need for fiscal policy that enables and endures this model is key to anchoring businesses in the UK to deliver energy security and economic growth.
Our signatories include manufacturers, professional services and engineering companies. Together, the organisations signing this letter represent a supply chain of 42 companies which support tens of thousands of jobs. We contribute billions to the UK economy in taxes paid, jobs supported, and through the domestic and international trade of our goods and services.
For our companies, this surprise risks operators – big and small – further scaling back or postponing their investment plans in response. The ramifications will be felt throughout the supply chain, through jobs, and the communities this industry supports, both directly and indirectly.
The UK spent almost £27bn on imports of crude oil and over £21bn on gas imports last year. This is £6bn more than receipts from UK crude oil exports and £17bn more than gas exports. The measures as announced risk both the net import gap for fuels, and the emissions footprint of fuel imports, growing long before the UK can deliver reliable, affordable, alternative energy sources. Furthermore, we place at risk our ability to capture and store CO2 emissions.
Rystad Energy’s UK oil and gas supply chain opportunities report highlights not only that the oil and gas supply chain has 60% to 80% capability overlap with the new energy segments but also that the success of the new energy verticals hinges on the oil and gas supply chain delivering into them. The report highlights the extent to which investment is being impeded by lack of final investment decisions.
The energy investment profile shift, from oil and gas to renewables, over the next decade is dependent on our ability to convert potential projects into committed ones. There is an urgent need to acknowledge the reality of the timescales required not only to deliver the UK’s decarbonisation ambitions but also in a way that protects existing jobs and creates new ones. The new energy activity will only maintain the current workforce if we manage the transition in a way that preserves skills and transitions jobs in line with project commitment timelines.
Sufficient investment in the UK energy transition can only happen if we support, not undermine our domestic oil and gas sector. Many countries are already leading the pack in both energy security and clean energy capabilities. The buoyancy of markets, the stability of fiscal regimes, and investment incentives, in the US, Norway and beyond are leading many to redirect resources abroad. As UK anchored businesses this is not a choice we wish to make – but a business imperative.
To remain a viable investment destination, our order books need both the promised pipeline of energy transition projects and ongoing oil and gas work.
Our vision is a future of economic and environmental prosperity underpinned by the talent and capital of the UK supply chain.
The Prime Minister has reassured the sector that the North Sea will be managed in a way that does not jeopardise jobs. The Treasury has been tasked with being the most pro-growth in our country’s history, and the Chancellor has committed to “working hand-in-hand with business”. Ministers have spoken of working in partnership, of the critical role of the people whose jobs are supported by our offshore energy sector, but we need those commitments to be honoured.
Time is running out to get this right. The role of the sector and its supply chain companies must be recognised with representation on the industrial strategy council and the supply chain task force. It is vital that the new government demonstrates actual commitment to working in partnership with the sector to secure continued investment and to deliver on promises to safeguard jobs.
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