Some believe there is still money to be made in the North Sea. The NSTA has approved 51 new exploration licences in the last year with up to 60 more pending. Energy secretary Claire Coutinho has argued for more, saying the domestic oil and gas industry is vital to the UK’s energy security and economy.
However, energy companies are not impressed by such blandishments. Few are investing and some are walking away – for reasons that have nothing to do with geology and everything to do with politics.
The current government’s windfall tax has raised the levy on oil and gas production profits from 40pc to 75pc. The vagaries of the tax system mean some operators have in fact faced tax rates in excess of 100pc.
Harbour Energy, the UK’s largest oil and gas producer, blamed the tax burden for halting its investment in the UK.
The likely next government has only added to the uncertainty. Labour has pledged to halt all new licensing, add another 3pc to the windfall tax and potentially even backdate it.
The impacts of those policy swings from the UK’s two main political parties are proving disastrous for both the industry and the country, argues Chris Wheaton, an analyst with Stifel who specialises in the offshore industry.
In a recent note, he estimated that the UK Government would lose out on £20bn of tax income if investment is “effectively being shut down by higher taxes or stopping any future developments”.
Energy security would also suffer, he argues. “UK gas production would see an accelerated decline, forcing more gas to be imported… with impacts on energy costs for consumers. We estimate the UK would be importing 80pc of its gas demand as early as 2030.”
Mike Tholen, policy director at Offshore Energies UK, the oil, gas and wind industries trade body, said shutting down UK oil and gas without first building the low-carbon systems to replace them, would leave the UK exposed to global price spikes and the whims of dictators.
“Over 23 million homes rely on gas boilers for heat and hot water and gas provides 40pc to 60pc of our electricity depending on wind strength,” he says.
“We can choose an energy transition where [oil and gas] infrastructure continues to offer opportunities for UK companies and workers. Or we can choose increasing reliance on energy from other countries.”
These arguments appear to be falling on deaf ears in Westminster, with no meaningful proposals to reduce the tax burden. Instead, decommissioning is the new name of the game.
This year’s general election will roughly coincide with Brent Charlie being cut away and melted down for scrap.