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French oil major, TotalEnergies, has proceeded with plans to shut down its FPSO, Gryphon, in the North Sea.
Decommissioning of the Gryphon, the first purpose-built FPSO installed on its North Sea site in 1993, had been planned by TotalEnergies since 2023. However, those in opposition to the move, notably Nobel Upstream which owns two oil fields tied back to the FPSO, have blamed the North Sea windfall tax, officially the Energy Profits Levy, first introduced by the UK Government in May 2022.
From 25%, the windfall tax has climbed steadily and now stands at 38%. Taken together with the 40% rate of corporation tax which North Sea energy firms must pay the total tax take is now 78%.
Nobel Upstream CEO Larry Bates, who had previously tried to prevent the TotalEnergies shutdown of the Gryphon, claims it will lead to a 2% fall in the UK’s domestic oil and gas supply and about £150 million less in tax receipts by the end of 2027. The Gryphon shutdown will mean his company has to abandon two fields connected to the vessel.
Meanwhile, the US President-elect Donald Trump declared on social media that the UK’s Labour Government was making “a very big mistake” by allowing oil and gas production to decline. It should “open up the North Sea” and “get rid of windmills”, he said.
Perhaps it has escaped his notice that the North Sea is one of the world’s oldest marine oil and gas basins where the first hydrocarbons were produced 50 years ago. Production has been declining steadily this century. Most of the heavyweight energy majors departed years ago and sold on their offshore oil and gas assets to secondary players in the sector.
Trump may also not know that until recently, the UK held pole position globally in offshore wind production before being overtaken by China in 2021. The UK’s offshore wind targets are dramatic, with the relatively new Government aiming to quadruple production from about 15GW today to 60GW by 2030, enabling the UK grid to operate at or close to net-zero by then.
The UK’s National Energy System Operator (NESO) has said that this target would require the UK to build offshore wind farms at a pace “far exceeding previous records”. However, NESO also said that it had confidence that this could be achieved by doing things differently. “The pipeline of projects exists, the necessary network expansion has begun, the system would be secure and operable, and the technologies are available at reasonable cost.”
However, politicians may have overlooked a few essential factors. These include but are not limited to: effective regulations and plan approvals; favourable financing structures; and huge investment in hardware, including wind turbine installation vessels and countless other service ships of various types.
And, since the UK doesn’t build ships anymore, they may not have realised the most of the world’s shipyards that can build at competitive prices are full.
