The UK Government has been warned that reducing its support for overseas oil and gas projects risks “endangering” firms in north-east Scotland.
Aberdeen and Grampian Chamber of Commerce (AGCC) made the written statement to a Westminster inquiry into the government’s financial support for fossil fuel exports.
The Environmental Audit Committee is carrying out the inquiry and its chairwoman, Mary Creagh, said the government’s financing of projects overseas “flies in the face” of the UK’s clean growth strategy.
Between 2014 and 2016, UK Export Finance (UKEF), the nation’s export credit agency, provided an estimated £551m annually to fossil fuel production in low and middle-income countries.
In the four years to 2014, 99% of all energy projects supported by the agency were based on fossil fuels.
The inquiry is assessing the impact of the subsidies and potential alternatives for them in line with the government’s clean growth strategy.
However, the AGCC said in written evidence that removing support for overseas projects risks “endangering the sustainability of our firms in the north-east”.
The chamber stated oil and gas firms are “anchored” to the region due to the demand for the skills and the ability of the supply chain to be easily exported, which is “safeguarded” by UKEF.
It stated that firms may need to instead look to other export credit agencies for funding, which would “influence decision making around the placement of assets and primary locations”.
The AGCC added that firms recognise the importance of the energy transition, and are diversifying gradually into renewables, but this would be threatened with the removal of export support.
It stated: “If major oil and gas export projects were no longer supported as strongly in the UK, the reduced export capacity of our domestic businesses would have an impact on their own financial stability, and their ability to sustainably direct resource to renewables and wider diversification.
“Without this support, we risk these projects progressing regardless, but without the involvement of our supply chain, risking lower standards and higher carbon emissions, while endangering the sustainability of our firms in the North-east and the UK as a whole.”
Industry regulator, the Oil and Gas Authority, has plans to greatly increase the supply chain’s share of international work as part of its “Vision 2035” to boost government revenues from the sector.
Shane Taylor, AGCC’s research and policy director, said: “Export support plays a vital role in anchoring our world class supply chain in the North-east of Scotland, by supporting our domestic firms to diversify their operations.
“Furthermore, examples such as the Offshore Cape Three Points project highlight that support from UK Export Finance can act to enable fossil fuel projects that simultaneously deliver substantial reductions in carbon emissions in developing countries.
“Critical technologies which will enable our low carbon transition, such as carbon capture, utilisation and storage, will draw from our supply chain firms and talent in the Aberdeen City region. Ensuring that the industry has stable access to export finance will allow for this transition to be delivered in a sustainable way, while recognising the ongoing role of oil and gas as a key contributor to our long-term energy mix.”
Announcing the launch of the inquiry at the end of last year, chairwoman Mary Creagh MP, who is the shadow environment secretary, said: “Almost all of UK Export Finance’s energy projects support fossil fuels overseas.
“This flies in the face of Government’s commitment to cut greenhouse gases, and locks developing countries into high-carbon energy production.
“We need joined-up thinking across Government to make sure that overseas financial support does not fly in the face of UK Government’s environmental commitments.”