North Sea drillers have warned UK and Scottish politicians of an “energy-supply catastrophe” if investment decline in the sector isn’t stopped.
The International Association of Drilling Contractors (IADC) North Sea chapter has sent a letter to all 650 MPs and 129 MSPs, urging them for “more vocal support of our oil and gas industry” ahead of next week’s Budget.
Energy Voice says that among the key asks of parliamentarians is recognition that stifling taxation could “kill the golden goose” of North Sea investment; exacerbating the energy crisis for the public.
“More vocal support of our oil and gas industry from policymakers is required urgently to avoid an imminent economic and energy-supply catastrophe on a national scale,” the IADC warned in the letter.
The group, which represents more than 800 drilling companies across the globe, including 14 key contractors in the UK, has already warned of a rig exodus for the North Sea, with drillers taking their vessels out of the region for more prospective regions with more secure fiscal regimes.
In the letter, the IADC said rigs could be “lost for good” due to issues like the windfall tax on North Sea oil and gas producers.
Criticial role
The group described drilling rigs as the “tip of the spear” for further oil and gas production, as well as being “vital” for decommissioning hundreds of North Sea oil wells, as well as playing a “critical role in meeting net zero” through facilitating carbon-capture utilisation and storage.
“Reduction in the available fleet size will severely hamper all of the above,” the letter reads.
IADC North Sea chair Darren Sutherland said: “This letter is not a case of drillers causing fear and alarm in order to protect self-interest.
“There is a real danger that the UK will be left without the resources and talent to make the energy transition a reality safely, swiftly and securely if we do not sit up and take notice now.“
- Industry body Offshore Energies UK has today repeated concerns about the government’s windfall taxes in light of new analysis published by the University of Aberdeen.
The research, carried out by Professor Alex Kemp and Artuto Regaldo, shows the energy profits levy on North Sea oil and gas producers is likely to discourage investment in new offshore oil and gas developments, particularly smaller fields.
OEUK also emphasised the impact of the electricity-generator levy on low-carbon generators, and the impact this tax could have on long-term energy infrastructure plans such as offshore wind.
The new university paper follows Scottish Government analysis released last week, which found that a decline of Scotland’s oil and gas production will increase Scotland’s emissions, threaten jobs and ultimately could make Scotland poorer.
OEUK sustainability and policy director Mike Tholen said: “We have seen more companies raising concerns about the future of the North Sea and their plans to invest there – and this report is a stark reminder that the windfall tax and the uncertainty it brings is ultimately bad for business.
“New exploration is needed simply to maintain the natural decline in production of North Sea oil and gas. Without new investment, production will fall even faster and could leave us nearly wholly-reliant on imports within this decade – offshoring our people, skills, and emissions to other countries.
Environment
“Ahead of the spring statement, OEUK urges government to create an environment that encourages investment in our domestic energy to make sure we can support our own energy security, jobs, and economy as we shift to a sustainable UK.
“Our industry wants to work with government to build that future, but we need an attractive and stable fiscal and regulatory regime if we are to achieve it.”