The new head of Offshore Energies UK (OEUK) says that despite record-breaking profits, Britain’s energy sector is struggling in the face of increasing taxes and a supply chain crunch.
In a blog post reflecting on his first 40 days in office, OEUK chief executive David Whitehouse echoed cautions from the wider industry that increased taxes and an unpredictable fiscal regime risked driving away investment in the supply chain and energy transition.
A former boss of CNR International, Mr Whitehouse took on the role leading the offshore trade body in January, succeeding Deirdre Michie who stepped down last year after almost a decade in charge.
Assuming the position against the backdrop of “a potential recession, energy security pressures, a major conflict in Ukraine and, sometime soon, a general election where energy and the cost of living will be top of the political agenda” he acknowledged it was “a busy time to take the helm.”
In light of bumper profits posted by the likes of Shell, BP and Equinor in recent weeks, both Labour and the Liberal Democrats have called for a “proper windfall tax” to be imposed on the oil and gas sector to help struggling households.
Yet Mr Whitehouse said the majority of earnings were not being made from UK production and that a lack of investor confidence would hinder further investment.
“Despite the headlines of major operators recording record global profits, it is clear that our sector in the UK is suffering. The profits that are hitting the headlines are not being made in the UK,” he said.
“We had a slow-down in activity due to COVID and have now been hit by tax changes that undermine investor confidence at a critical point for the sector. Without continuing to attract investment, our supply chain will contract, and operators will move capital and expertise elsewhere.”
It comes as EnQuest said the North Sea is no longer its growth area, while Harbour Energy has blamed the windfall tax for Aberdeen job cuts.
“Under these circumstances, it’s hard to envisage a successful transition. We need to fix that,” he continued.
The blog follows a report by the trade body which found that many supply chain companies are “in crisis” as inflation erodes margins.
This week, drilling contractors joined the call urging politicians to main support for the region lest it lose its fleet of drilling rigs for good.
Outlining four immediate priorities for the organisation, Mr Whitehouse said he would seek to align with governments “urgently” to deliver an environment that allows continued investment; deliver on plans to decarbonise production; use the supply chain to seize transition opportunities; and inspire people to keep driving the sector forward.
Risk of ‘imported’ transition
He also warned that without the right support the UK would “import the energy transition” rather than meet it with a home-grown workforce and supply chain.
“In this scenario, many thousands of new jobs and the value add for the UK will be a missed opportunity,” he noted.
However, he pointed to the opportunities presented by the sector’s target to achieve more than 50% local content in new energy projects and decommissioning, and the organisation’s recent ShareFair event.
The latter saw representatives from operators including BP, Equinor, Ocean Winds and Spirit Energy highlight the potential from their upcoming projects, spanning both oil and gas and renewables.