A lack of pace behind new energy projects, high taxes and a hostile environment for oil and gas companies have been highlighted as key concerns in the latest Energy Transition survey.
Produced by Aberdeen & Grampian Chamber of Commerce, alongside KPMG and ETZ, the biannual barometer shows business confidence in the UK Continental Shelf is at a near record low, falling from +36 points last April to -37 today.
At the same time, confidence in overseas work remains high, with the operators surveyed confirming that discretionary capital is now being diverted away from the UK.
The report predicts an uplift in renewables activity on the region, as the energy transition gathers pace, and new infrastructure like the £400m South Harbour development in Aberdeen facilitates a growth in green industries.
However, sharp declines in oil and gas exploration and production are also forecast, despite the UK becoming increasingly reliant on imported energy, and the security of supply issues which have arisen following Russia’s invasion of Ukraine.
Government policy, including taxation, has emerged as the biggest factor impacting future activity levels, with almost two thirds of those surveyed believing that none of the UK’s political parties is delivering the best policies for both energy transition and security.
Despite the Scottish Government’s energy strategy containing a number of measures which are supportive of energy transition, just 7% believe the SNP the best policies to deliver it.
The survey - which is now in its 19th year - made four recommendations to industry and government.
They include a price floor on the Energy Profits Levy to restore investor confidence in the North Sea, and cross-party support for domestic oil and gas production, if the alternative is importing from abroad at a greater carbon cost.
The report also advocates a tripartite effort between industry, academia and government to create a more positive narrative for the energy sector, so that it can attract a new generation of workers.
It also calls for further pace to be injected into the transition, particularly around licensing and consenting developments.
Russell Borthwick, chief executive at Aberdeen & Grampian Chamber of Commerce, said: “It is pleasing to see that the energy transition is well and truly in action, with respondents projecting that 45% of their operations will be in new energy activities by 2030.
“However, as has been warned for over a year now, we are risk of accelerating the decline of our oil and gas sector at a pace which jeopardises the skills and investment required to deliver the UK’s net zero plans.
“Government and industry share the same green aspirations, but there is a clear disconnect between policy makers and those who will fund and deliver our low carbon future, particularly over the role of oil and gas. This needs to be addressed as a matter of urgency.”
Robert Aitken, director at KPMG in Aberdeen, said: “The latest survey shows that the north east’s energy industry is evolving and is working towards a future where greener activities start to outweigh more carbon intensive ones, but clearly more support is needed from all corners to maintain focus on the long-term objective of net zero.
“How we reach this is still up for debate, and depends on a variety of factors, including demand patterns and how businesses are properly encouraged, equipped and incentivised to invest in greener activities and solutions.
“What is clear is that businesses need to think about the future because change is coming,“ he continued, adding: “Having a well thought out ESG strategy is an imperative and acts as a license to operate in today’s environment.”
Maggie McGinlay, chief executive at ETZ, said that the decline in the past year is to a level only outstripped by the financial crisis of 2008, the oil crisis and the aftermath of Covid.
“With the majority of businesses pointing to the Energy Profits Levy as having had the most negative impact on business, there is also a loud message that there continues to be a need for policymakers in both Scottish and UK governments to provide a clearer vision going forward so that the sector can regain that vital confidence in order to deliver the transition which will benefit everyone.
“Many of the issues explored by this survey - investment in strategic infrastructure, technology innovation, supply chain development and skills - sit at the centre of ETZ’s vision, which is why we continue to work closely across industry, government and stakeholders in taking advantage of every opportunity where progress can be made.”
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