Energy Indicators

The UK has seen significant changes across both the energy sector and financial landscape in recent years, with changing regulations and policies heightening market uncertainty and leaving many looking for definitive answers.

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With goals of establishing the UK at the forefront of renewable energy, Labour initially stated that new exploration licences would not be considered, and instead pushed investment across offshore and onshore wind, hydrogen and solar.

In response to the ongoing changes in government policies, investors and key industry players are revising their strategy towards energy production and capital allocation.

Equinor and Shell announced they look to combine their UK offshore oil and gas assets, with Ithaca Energy and Eni set to merge their UK assets and announcing they have “revitalised” the controversial Cambo oil field.

Recently, NEO Energy and Repsol have announced a strategic merger across their North Sea assets, after the Spanish operator confirmed job cuts were planned across their North Sea operations.

Some firms have taken a different approach and plan to leave the North Sea entirely, as Apache announced they will end all North Sea operations by 2029, with several operators blaming the UK energy policy and tax regime for the restructuring and relocation.

The current Labour government hoped renewable projects would unlock more jobs, increase domestic production and boost the economy. However, many industry players remain cautious, with UK trade body OE UK highlighting “the need for government to support investment in homegrown gas and oil as well as wind, hydrogen and CCUS to avoid widening the energy import gap”.

As Labour’s Spring Statement showed little mention of energy policies and spending, many have expressed fears that the 2030 goals for clean and low-carbon power in the UK could suffer from a lack of investment down the line, with the UK Treasury already weighing up funding cuts at GB Energy, Labour’s state-owned energy company, to manage the increased defence budget.

Following increased scrutiny and frustration from players across the UK’s traditional energy sector, Labour have confirmed they look to revise their windfall tax regime when levies run out in 2030, and have said they are looking to engage in discussions with operators to potentially overhaul the EPL to keep the North Sea “at the heart of Britain’s energy future”.

Additionally, Rachel Reeves announced that both the Jackdaw and Rosebank oil and gas developments would go ahead under the terms that Labour would honour existing North Sea licences, despite a previous ruling that initial consent for the projects was granted unlawfully.

Anas Sarwar, leader of the Scottish Labour Party, commented that the UK should be “maximising our existing resources”, further highlighting the apparent reversal of Labour’s comments to end new oil and gas licences.

Operators are backtracking, too. Following a period of market downturn compared to their international counterparts, LSE-listed supermajors BP and Shell unveiled strategies to refocus and pivot spending on fossil fuel developments.

An apparent changing shift in sentiment from the current government and potentially a more sensible fiscal approach, paired with a string of announcements from industry players adjusting their UK operations, could see the UK enter a transitory period towards energy policy, leaving behind the market uncertainty and volatility of recent years.

Despite the UK oil and gas markets becoming “uninvestable” due to EPL taxes, offshore equipment and energy service M&A activity has remained buoyant in recent years, underpinning the quality of the UK energy supply chain.

© Supplied by Piper Sandler

Businesses with an international footprint and transferable skillsets continue to transact, with Piper Sandler advising on a number of these deals in recent years.

To name a few, Sentinel Marine, a UK-based vessel operator, was acquired by Cyan Renewables. ROVOP, a leading independent ROV service provider, was acquired by The Chouest Group, and Seatronics & J2, providers of subsea electronics and ROV tooling rental services, were acquired by Ashtead Technology.

Proserv, an Aberdeen-based provider of subsea and topside controls solutions, completed a management buy-out (MBO) backed by GIIL, a London-based financial lender, and most recently, Subsea Micropiles, a provider of innovative marine anchor systems for offshore floating wind foundations, secured investment from the Scottish National Investment Bank and Marubeni-Itochu Steel.