In the aftermath of the extraordinary findings from Aberdeen & Grampian Chamber of Commerce's (AGCC) 39th Energy Transition survey, ChamberTalk host Finlay Jack sat down with AGCC's Policy Director, Ryan Crighton, Director of the Energy Transition Institute at Robert Gordon University (RGU), Paul de Leeuw, and analyst at investment banking firm Stifel, Chris Wheaton.
The full episode is available on Spotify, Apple Podcasts and YouTube.
100,000 jobs
Warnings that 100,000 jobs could be lost in the sector should Labour’s tax plans come to fruition surfaced in February from Chris.
His report added that, best case scenario, only 20,000 jobs would go.
When asked about how he arrived at the 100,000 figure, Chris said: “It’s pretty clear that if you look at total jobs from the UK, based on the government’s own data, that jobs correlates quite strongly with total spending in the offshore energy industry.
“That’s the total of not just operating expenditure, but also the capital expenditure as well.
“Those two numbers of total spend and jobs have correlated pretty well over the last 15 or 20 years.
“If you extrapolate that number forward, as the North Sea stands on a cliff edge, that means that number of jobs is at risk. Half of the 200,000 we’ve got at the moment.
“That’s going to happen pretty quickly, by 2029 or 2030.”
EPL: ‘A tax on certainty’
The discussion moved on to discuss the future of the Energy Profits Levy (EPL), which hangs in the balance during the General Election campaign.
The Conservatives have already prolonged the tax on oil and gas profits to 2029, despite protestations from a number of the party's North-east politicians.
Meanwhile, Labour has said it plans to increase the rate of the windfall tax to 38% (taking it to total tax rate of 78%), as well as remove all investment allowances.
"Taxes act as a tax on certainty and a tax on confidence," Chris continued.
"What we’re seeing is companies decide there’s too much uncertainty here and there’s the risk that that capital is either not going to be spent at all or it’s going to be taken elsewhere.
"For example, Harbour Energy, the UK’s largest oil and gas producer, it’s spending now $10bn buying an oil and gas company called Wintershall, they’re based predominantly in Norway.
“Harbour Energy is currently 95% based in the UK. After it’s done this big acquisition, it’s going to be about 30% in the UK and its largest business is going to be in Norway.
“That’s an example of $10bn that’s being spent outside the UK to acquire business there.
“That’s the kind of trend of capital flow that we’re going to see if these taxes are imposed and we marginal tax rates on the industry rising to the levels that are contained in the policy proposals.
“The proposals contained in the Labour Party briefing paper would be the 12th
change in taxation to the UK North Sea since 2006…I’m not even sure it is 12, I might have lost count.
“The thing is, you can’t have a change in tax every other year and expected people to believe when you say ‘we’re going to give you certainty’ that that is actually going to happen.
“When you keep changing the tax you keep taxing certainty and that hurts investment.”
'We have to develop the winning story'
A report from RGU last September, Powering up the Workforce, found that the UK offshore energy workforce can increase by up to 50% by the end of the decade if a successful transition is achieved.
“If we get this right, we can see the workforce transferring, we see the supply chain having a continuous future and we can make this a fantastic place,” Paul, who co-authored RGU’s report, said.
He added: “If we get it wrong, shame on us. Because we’re going to take our capabilities away, we’ll see the people disappearing, supply chain disappearing supporting overseas activities and we end up importing not only energy but also skills and capabilities to accelerate the energy transition itself.
“We could be the absolute global hub of developing, particularly the offshore wind sector, but also energy integration connecting wind into power for offshore facilities, the connection with hydrogen, the connection with carbon capture and storage.
“There’s a winning story here and we have to go after it to develop the winning story."
Britain hasn't had enough of experts
Chris later referenced an infamous Michael Gove phrase from 2016.
"Britain has had enough of experts."
Chris said: "The problem is experts know what they’re talking about."
He continued: "The key messages here are very simple. It’s about jobs, it’s about energy security, it’s about emissions for the windfall tax.
“The North Sea sustains jobs and an eco-system that is going to be vital to the energy transition in the future.
“About energy security, our projections are that the UK could end up importing 80% of its gas by 2030 and 90% by 2034. That’s not in an environment where gas just goes away because we’ve got renewables replacing it, that’s when we still need gas to offset the intermittency of renewables, when the wind doesn’t blow and the sun doesn’t shine. We need that back up to make sure the lights stay on.
“It’s also about emissions. If we don’t produce our own energy, we’ve got to still import it from somewhere. That means we’re importing it at higher emissions that if we were generating it domestically. We’re also not getting the jobs and the tax benefits if we’re importing.
“There’s very clear messages about jobs, energy security and emissions that the industry needs to focus on."
Route map required
Paul added: "I don’t think any of the political parties have an argument around a destination that’s in 2050 or 2045 in Scotland; this is a conversation about a journey and how to get there.
“There is no current plan, in the UK or in Scotland, that gives us the route map to net zero.
“There needs to be a credible plan and whoever gets in power needs to work with industry, regulators and stakeholders to develop that plan.
“I think there’s a really good window to do so.
“Also, there’s an element of really explaining what’s the consequence of getting this wrong. There’s an economic consequence, there’s a jobs consequence, there’s an emissions consequence.”
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