The UK’s North Sea oil and gas companies are failing to switch their investments to renewable energy, shows a recent analysis by climate campaign group Uplift.
According to the organisation, most offshore oil and gas companies operating in the UK are not redirecting their investments away from fossil fuels, despite the industry’s assertions that it is leading the country’s energy transition.
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Only seven of the 87 offshore oil and gas companies are projected to invest in renewable energy by 2030, Uplift states.
Additionally, just two of those seven companies will shift more than half of their investment portfolios to renewable energy projects by the specified date. One of the seven intends to invest in wind energy to support further oil and gas production.
The UK Government has pledged to ban the issuance of new licences for oil and gas fields in the North Sea, although existing fields will be permitted to continue operating.
No pending licences would be revoked, so several potential fields in the early stages of licensing could still proceed.
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By GlobalDataBefore the election, Kier Starmer’s Labour Party also announced its plans to implement a new windfall tax on oil and gas companies. The Effective Petroleum Tax Rate (EPL) will raise taxes for these companies by 3% on 1 November.
This increase will result in the headline tax rate for oil and gas operations reaching 78% – one of the highest in the world.
The windfall tax on oil and gas profits is not the main reason for the UK’s lack of investment in renewable energy. Only six offshore oil and gas companies have invested in UK renewable energy projects since 2015, according to Uplift.
By 2030, renewable energy is predicted to make up almost two-thirds (63%) of investment in the UK’s energy transition, with oil and gas operators contributing only 10% of this spending, it adds.
The North Sea’s declining production is expected to reduce oil and gas investment to 19% of total energy transition project investment in the UK. This lack of investment seriously affects the supply chain, industry workers, and communities reliant on the oil and gas industry.
During the UK election campaign, Starmer reassured voters about job security in transitioning to a greener economy, but concerns remain about potential employment challenges for industry workers due to Labour’s oil licensing pledges.
According to Uplift, policymakers must recognise that the industry’s lack of investment in the transition reduces its role to a “minor player” in the UK’s future energy system.
The industry is failing to deliver on its promises to transition, with most companies “only interested in profiting from oil and gas for as long as the North Sea’s reserves allow”, the organisation claims.
“The government needs to take responsibility for managing the transition out of the hands of the oil and gas industry and instead come up with a coherent plan for the basin that recognises the climate imperative of phasing out oil and gas, and crucially prioritises the needs of workers, communities and supply chain companies in the North Sea’s transition,” the report reads.
