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Oil and gas jobs dominate Scotland’s election battle

Oil and gas jobs dominate Scotland’s election battle

 

The future of Scotland’s oil and gas industry has taken centre stage in the UK election campaign, as parties seek to persuade workers they can prevent mass job losses by delivering a “just transition” to renewables.

Uncertainty over the business environment has raised concerns among industry groups that as many as 100,000 jobs are at risk because of the 75 per cent windfall tax regime on oil and gas producers brought in by the Conservatives that would be increased by an incoming Labour administration.

First minister John Swinney, leader of the Scottish National party, has taken aim at Labour, arguing its plans to tax the sector threaten to turn Aberdeen and its environs into “an industrial wasteland”.

But a more favourable approach towards the fossil fuel industry in the north-east could alienate voters in the urban central belt, easing Labour’s path to sweep up seats from Glasgow to Edinburgh.

Confidence among North Sea companies is lower than during the financial crisis, according to the Aberdeen and Grampian Chamber of Commerce, which represents businesses in the heart of Scotland’s energy industry.

“Another tax will be a tax too far,” Ryan Crighton, policy director at the Aberdeen chamber told the Financial Times. “Labour’s policies have been drawn up on the assumption that North Sea oil and gas companies are raking in record profits, and that there are jobs aplenty in renewables. Neither is the case.”

In a sign of financial stress for operators in the UK continental shelf, Waldorf Energy Partners, last week announced that it was filing for administration after two subsidiaries defaulted on their debt.

Jersey Oil and Gas, partner in the Buchan field north-east of Aberdeen, meanwhile, has said final approval for the £900mn project, set to create 1,000 jobs, would depend on “fiscal clarity from the next government”.

Industry criticism of the windfall tax has been on the rise since chancellor Jeremy Hunt extended the levy on fossil fuel profits by a year during his March Budget, prompting rare criticism from Scottish Conservatives head Douglas Ross, who is standing down as party leader after contesting a seat at the election.

Ross, speaking in Brechin in the Tory target constituency of Angus and Perthshire Glens, claimed his party was the only one standing up for North Sea workers. “The contrast is stark — all the other parties are going to abandon the oil and gas sector,” he said.

The issue is most delicate for the SNP, which is fighting to remain the largest party in the country but faces a strong challenge from Labour in central Scotland, where polls suggest the SNP could lose as many as 30 seats.

The SNP is up against the Conservatives in north-east seats, where one in three workers depend on the offshore energy industry.

Swinney is plotting a precarious path between industry demands for development licences and renewable advocates who want to shut down hydrocarbon production as the continental shelf’s productivity declines.

About a quarter of Scots believe more investment in North Sea oil and gas will result in affordable and secure energy, according to a poll of Scots commissioned by Uplift, an advocacy group for a transition away from oil and gas. Whereas two-thirds believe investment in renewables is more likely to deliver energy security.

Swinney’s believes the journey to net zero must be delivered in “a managed fashion”. “We need a climate compatibility test for every decision we make,” he has said of new development licences.

His nuanced position is in contrast with some colleagues who think the party should roll back the windfall tax and ditch its stated “presumption against” new licences.

But Labour intends to go even further to accelerate the renewable transition. The party plans to increase the effective tax rate on oil and gas producers to 78 per cent and remove investment allowances.

“We don’t want to preserve a declining industry, we want growing industries,” shadow chancellor Rachel Reeves said this month in Edinburgh.

It has dangled the prospect of £8bn of investment over five years into green power via its proposed state-owned, Scotland-headquartered GB Energy company, funded by a “proper” oil windfall tax.

Aiming to create more than 50,000 clean energy jobs, the initiative forms Labour’s main offer to the Scottish electorate. “We now have something positive to sell on the doorstep,” said one Labour candidate of the initiative.

Scotland’s offshore energy workforce could grow by a quarter from 79,000 to 100,000 if the UK meets its targets, including 50GW of offshore wind and 10GW of hydrogen by 2030, according to a report by Robert Gordon University. If not, it could shrink by almost 40 per cent.

Still, the Aberdeen chamber warned that UK-based companies were increasingly looking at overseas markets for future investment and projects.

Francesco Mazzagatti, chief executive of Viaro Energy, which bought RockRose Energy for £248mn in 2020, said the company was considering slowing down UK investments and seeking opportunities in other countries to improve profitability.

“One of the main drives to look into the UK was because as a small independent, we were looking to go into a country that was geopolitically stable and the tax regime was stable,” he said. “Unfortunately this was wrong.”

Read the latest issue of the OGV Energy magazine HERE

Published: 11-06-2024

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