Sustained political support is as important to investment in the UK’s oil and gas sector as commodity prices, an industry body has said.
Offshore Energies UK (OEUK) said that some companies were ranking the political risks from operating in the North Sea as greater than any financial danger. There are concerns companies are holding back on investing in UK projects and that could mean a greater reliance on imported energy.
The proposed Cambo oilfield featured heavily in the run-up to the Cop26 climate talks in Glasgow last year. Environmental campaigners were opposed to a licence to develop it or any other new fields in UK waters.
Nicola Sturgeon also came out against Cambo and has since re-iterated her stance, to the dismay of many within the SNP, particularly those representing communities across the northeast of Scotland.
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The UK government, which is responsible for oil and gas licensing, is expected to approve a number of new fields over the next 12 months.
Ross Dornan, the market intelligence manager at OEUK, said there could be up to £4 billion of investment in North Sea oil and gas this year. Asked about the value of political support for oil and gas, he said: “I can’t reinforce how important it is for companies that are looking to invest and the risk profiles of those investments.” He said this was important “not just for now, not just for the rest of this political term but for the years and decades to come”.
OEUK said North Sea investment was £16 billion in 2014 but had fallen to £5.5 billion by 2019 with a complex regulatory environment and “political disagreements” over taxes and climate change among the factors responsible. Francesca Bell, senior investor relations adviser at OEUK, said: “Political risk is, we are seeing in some cases, higher than fiscal risk.”