In an open letter (released in full below) more than 40 organisations said the confirmed 3 per cent increase to the Energy Profits Levy (EPL) to take the headline rate to 78 per cent, extension to 2030 and the removal of the investment allowance and a reduction in capital allowances risks thousands of jobs, and the companies critical to the UK Government’s industrial strategy and progress towards its net zero targets.
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.
In the letter issued by Offshore Energies UK (OEUK) — representing more than 400 companies — the signatories urge the new government to demonstrate its commitment to working in partnership by inviting the sector to join the Industrial Strategy Council and Supply Chain Task Force. This partnership with the sector will realise the full benefits of a homegrown energy transition, supported by jobs, skills and companies anchored in the UK. The letter also explains why the supply chain is concerned and impacted by the EPL, which is a tax paid by operators.
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.
Excerpts from the joint letter issued to Sarah Jones, Minister of State for Industry and Decarbonisation are provided below:
“We look at proposals to increase the EPL; extend its term; and reduce the rate of capital allowances with grave concern that these would be a blunt response which could undermine the levers to long term solutions and jeopardise jobs in communities across the UK.”
“For our companies, this surprise risks operators – big and small – further scaling back or postponing their investment plans in response. The ramifications will be felt throughout the supply chain, through jobs, and the communities this industry supports, both directly and indirectly.
“Time is running out to get this right. The role of the sector and its supply chain companies must be recognised with representation on the industrial strategy council and the supply chain task force. It is vital that the new government demonstrates actual commitment to working in partnership with the sector to secure continued investment and to deliver on promises to safeguard jobs.”
Commenting, David Whitehouse, CEO, Offshore Energies UK says:
“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.
The full text of the open letter and a list of signatories is below:
21 August 2024
Sent on behalf of members of the Offshore Energies UK Supply Chain
Dear Minister Jones,
We write on behalf of the UK offshore energy supply chain.
Our members share the vision and ambition of the Government on delivering a home-grown energy transition and net zero with potential to spend almost £200 billion over the decade. The majority of this could be spent in offshore wind, carbon capture and storage and hydrogen in the right investment environment. To deliver net zero, there needs to be an unprecedented amount of private investment unlocked. We remain convinced that the knowledge, experience, and capital our sector can bring to bear, in partnership with a pragmatic policy embedded in manifesto plans, will turn ambition into action and form a credible programme for government and the UK economy.
The demands on HM Treasury are and will continue to be significant. Historic debt, record high inflation, fluctuating strength in the pound, and challenging borrowing environments, means that the bedrock to success and delivering growth in the economy can only be collaboration between private and public capital. It will be essential to create an attractive and competitive environment through clear fiscal principles to give investors certainty to invest in the UK through to 2050 and beyond across the entire energy landscape. The reality of the transition is that we need both oil and gas and renewables in an integrated energy system.
In the search for solutions to the concerns surrounding the state of public finances, the need for long term thinking has never been greater.
We look at proposals to increase the EPL; extend its term; and reduce the rate of capital allowances with grave concern that these would be a blunt response which could undermine the levers to long term solutions and jeopardise jobs in communities across the UK.
The companies investing in nascent opportunities like floating offshore wind and CCS will require the cashflow from a stable and predictable oil and gas business to fund these opportunities.
Hundreds of companies at the heart of UK plc operate a multi-revenue approach, progressing oil and gas and renewable opportunities in tandem. This is not a coincidence, and this business model will be essential to the commercial and economic success of companies throughout the transition. Allowing us to maintain 200,000 jobs in the UK including 90,000 in Scotland. Policymakers understanding and supporting the need for fiscal policy that enables and endures this model is key to anchoring businesses in the UK to deliver energy security and economic growth.
Our signatories include manufacturers, professional services and engineering companies. Together, the organisations signing this letter represent a supply chain of 46 companies which support tens of thousands of jobs. We contribute billions to the UK economy in taxes paid, jobs supported, and through the domestic and international trade of our goods and services.
For our companies, this surprise risks operators – big and small – further scaling back or postponing their investment plans in response. The ramifications will be felt throughout the supply chain, through jobs, and the communities this industry supports, both directly and indirectly.
The UK spent almost £27bn on imports of crude oil and over £21bn on gas imports last year. This is £6bn more than receipts from UK crude oil exports and £17bn more than gas exports. The measures as announced risk both the net import gap for fuels, and the emissions footprint of fuel imports, growing long before the UK can deliver reliable, affordable, alternative energy sources. Furthermore, we place at risk our ability to capture and store CO2 emissions.
Rystad Energy’s UK oil and gas supply chain opportunities report highlights not only that the oil and gas supply chain has 60% to 80% capability overlap with the new energy segments but also that the success of the new energy verticals hinges on the oil and gas supply chain delivering into them. The report highlights the extent to which investment is being impeded by lack of final investment decisions.
The energy investment profile shift, from oil and gas to renewables, over the next decade is dependent on our ability to convert potential projects into committed ones. There is an urgent need to acknowledge the reality of the timescales required not only to deliver the UK’s decarbonisation ambitions but also in a way that protects existing jobs and creates new ones. The new energy activity will only maintain the current workforce if we manage the transition in a way that preserves skills and transitions jobs in line with project commitment timelines.
Sufficient investment in the UK energy transition can only happen if we support, not undermine our domestic oil and gas sector. Many countries are already leading the pack in both energy security and clean energy capabilities. The buoyancy of markets, the stability of fiscal regimes, and investment incentives, in the US, Norway and beyond are leading many to redirect resources abroad. As UK anchored businesses this is not a choice we wish to make – but a business imperative.
To remain a viable investment destination, our order books need both the promised pipeline of energy transition projects and ongoing oil and gas work.
Our vision is a future of economic and environmental prosperity underpinned by the talent and capital of the UK supply chain.
The Prime Minister has reassured the sector that the North Sea will be managed in a way that does not jeopardise jobs. The Treasury has been tasked with being the most pro-growth in our country’s history, and the Chancellor has committed to “working hand-in-hand with business”. Ministers have spoken of working in partnership, of the critical role of the people whose jobs are supported by our offshore energy sector, but we need those commitments to be honoured.
Time is running out to get this right. The role of the sector and its supply chain companies must be recognised with representation on the industrial strategy council and the supply chain task force. It is vital that the new government demonstrates actual commitment to working in partnership with the sector to secure continued investment and to deliver on promises to safeguard jobs.
Signed by:
- David Whitehouse, Chief Executive Officer, Offshore Energies UK
- Kevin Franklin, Chief Executive Officer, 3t
- Alexis Fletcher, Chief Executive Officer, Ancala Midstream
- Ryan Menzies, Board Director, Apollo Engineering Consultants
- Mike Pettigrew, Group Chief Executive Officer, ASCO UK
- Sandy Bonner, UK President, Bilfinger UK
- Howard Johnson, Managing Director, Blaze Manufacturing Solutions
- Tom Murdoch, Managing Director, Brimmond
- Matt Rhodes, Director UK Energy Services, Bristow Helicopters
- Adam Byrne, Operations Director, CAN Group
- Colin Black, Managing Director, Carjon-NRG
- Iain Edgar, Director, Clarity Energy
- Sam Hanton, Executive Vice President, Claxton Engineering
- Robert Allan, Managing Director, Core Energies
- Martin Smith, Managing Director, Cyber Prism
- Jon Oliver Bryce, Chief Strategy Officer, Dolphin Drilling
- Lenny Collins, Group Managing Director, Dron & Dickson Group
- Raghbir Chand, Managing Director, ESR Technology
- Nassima Brown, Director, Fennex
- Neil Meldrum, Managing Director, FourPhase
- Bob Drummond, Executive Chairman, Hydrasun
- Steven Harris, Managing Director, Integrity HSE
- Stuart MacBride, Chief Executive Officer, International Medical Management
- Peter Skinner, UK Country Manager, KCA Deutag Drilling
- Kevin Watt, Managing Director, Kinetics Controls & Innovation
- Matthew Lewin, Technical Director, Marine Technical Limits
- Gregor Scott, Managing Director, Ocean Installer
- Ivan Gutierrez, Chief Executive Officer, OGC Energy
- Chris Coull, Managing Director (Scotland), Peterson
- Ryan Stewart, Chief Commercial Officer, Prosafe Offshore
- Davis Larssen, Chief Executive Officer, Proserv
- Botan Osman, Chief Executive Officer, Restrata
- Louise Martin, Director, Rigrun
- Scott McKenzie, Partner, RLG International
- Nick Dunn, Chief Executive Officer, Score Group
- Ed Morrow, Managing Director, Sodexo
- Hani El Kurd, Senior Vice President UK, Subsea7
- Phil Brading, Chief Operating Officer, Sword IT Solutions
- MJ Karbasian, Chief Executive Officer, Veunex Global
- Doug Birnie, UK Director, Weatherford UK
- Phil Milton, Chief Executive Officer, Well-Safe Solutions
- Martin Simmonite, Senior Vice President UK Operations, Wood
- Stephen Swindell, Chief Executive Officer, Xodus Group
- Chris Johnson, Vice President – Oilfield Services & Equipment, Baker Hughes
- Simon McBain, Managing Director, Camm-Pro
- Alison Reid, UK Regional Manager & Managing Director, ChampionX
- Ronnie Vettese, UK Marine Managing Director, Survitec
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