MORE than 40 energy supply chain companies have expressed “grave concern” about government plans to hike windfall taxes and eliminate investment.
In an open letter to HM Treasury, the companies have warned that the plans threaten £200billion of investment in all forms of domestic energy, including renewables.
In the letter, issued by Offshore Energies UK, firms express concern that reduced investment and greater uncertainty would be felt throughout the supply chain “through jobs, and the communities this industry supports, both directly and indirectly.”
They also argue that oil and gas revenues are helping fund investment in renewable energy.
A hostile tax environment would threaten not only the oil and gas industry, but also the firms who invest in renewable energies using cash generated through fossil fuels, the letter suggests.
“The companies investing in nascent opportunities like floating offshore wind and carbon capture and storage will require the cashflow from a stable and predictable oil and gas business to fund these opportunities,” it says.
“Sufficient investment in the UK energy transition can only happen if we support, not undermine our domestic oil and gas sector.”
The signatories include manufacturing, engineering and technology companies with a broad footprint of offices and workshops across the whole of UK, employing tens of thousands of people whose jobs depend on oil and gas, wind, hydrogen and carbon capture projects.
OEUK has identified £200 billion in private domestic ready to support the wider energy transition through domestic offshore wind, carbon capture and storage, and hydrogen that could be unlocked by more globally competitive policies for the sector.
Last May, Harbour Energy, the UK’s largest oil and gas producer, told staff it would cut 350 UK jobs, blaming the UK government’s windfall tax changes.
A Treasury spokesperson said that it is “strengthening the previous government’s windfall tax to ensure North Sea oil and gas producers contribute their fair share towards our energy transition.”
“Our plans for a new National Wealth Fund and establish Great British Energy will create thousands of new jobs in the industries of the future,” they added.
Commenting, David Whitehouse, CEO, Offshore Energies UK said:
“Supply chain companies are the backbone of the UK’s offshore energy industry and have powered the country for last 50 years.
“To harness the full potential of these world class UK companies for the next 50 years there is no simple choice between oil and gas or renewables. The reality is that we will need both to support these companies, power the country and grow the economy.
“This letter shows the level of concern felt by supply chain companies about the government’s new tax proposals. It also shows a clear desire to be represented in the task forces and councils determining industrial policy.
“If oil and gas operators scale back activity as a result of the proposed changes to the Energy Profit Levy, it has a direct impact on our world class supply chain. The impact of the EPL changes will be felt much more widely than oil and gas operators who pay the tax directly.
“We will rely on these British firms of all sizes to deliver a homegrown energy transition, which is the path to economic growth, energy security and net zero. The government has committed to working in partnership with industry, it is vital this sector is represented in the groups determining industrial policy and that the Government appreciates the impact that their proposed tax changes will have on the supply chain, which is responsible for most of the 200,000 jobs supported by this sector.”