Government policy is putting the UK’s domestic gas production and energy transition at risk, a major energy infrastructure company has warned.
The warning comes as local MPs and senior industry figures held a roundtable meeting on Thursday, organised by trade body Offshore Energies UK (OEUK) and hosted at Kellas Midstream’s Central Area Transmission System (CATS) gas terminal near Middlesbrough, where around 25% of the UK’s supply of North Sea gas comes ashore.
The discussion included David Whitehouse, chief executive of OEUK, which represents more than 400 offshore energy producers and supply chain companies; Nathan Morgan, chief executive of Kellas Midstream; and concerned local MPs, local authority, trade body, and related industry representatives.
Almost 4,500 jobs on Teesside are in the offshore energy sector or its supply chains, according to data compiled for OEUK.
The UK Government’s ‘windfall tax’, or Energy Profits Levy (EPL), deters investment, threatens jobs and risks creating a gap in the transition to net zero by 2050.
Kellas Midstream, a UK-focused energy infrastructure company, has issued a submission to Chancellor Rachel Reeves ahead of this month’s Budget to advise that current policy including the energy windfall tax, increases dependency on imported gas jeopardising jobs and tax take.
- Government energy transition data shows that the UK will import 80% of its gas in the 2030s and already imports more than 50% of its needs. Kellas is concerned that current UK energy policy will increase these imports further.
- If this happens the UK will miss the clear economic and environmental opportunity offered by North Sea gas to reduce the higher methane emissions from liquefied natural gas (LNG) imports that come from far-flung areas such as the USA’s onshore fracking basins, Qatar, and Peru’s Amazon jungle.
Kellas Midstream is ready to invest in a large scale (1GW) very low carbon ('blue') hydrogen project (H2NorthEast), that will decarbonise these Teesside industries. There is currently no other practical way to decarbonise these important jobs at a time when ‘offshoring’ of UK industry and emissions is increasingly coming under the UK’s environmental and economic spotlight.
Both organisations said growth can be unlocked through government reform.
David Whitehouse, Chief Executive of Offshore Energies UK, said:
'This month’s Budget is a vital opportunity to secure the future of the North Sea and the UK’s energy system.
'Jobs linked to the offshore energy industry are key to the economy of Teesside, the North East of England, and every part of the UK.
'The windfall tax is costing jobs and investment and reducing the tax revenues that support families, communities and vital services.
'Decisions made in the next few weeks will determine whether we keep investment and jobs here or lose them overseas, whether we raise more money for public services or reduce Treasury income, and whether we achieve our net zero goals or jeopardise them.'
Nathan Morgan, CEO of Kellas Midstream, said:
'We are making a positive case for UK domestic gas production. It creates jobs, investment and government revenue, and reduces the need for imports with higher greenhouse gas emissions.
'UK North Sea gas is a critical part of the UK energy system and will continue to be for decades to come.
'As a key part of the energy transition, North Sea gas is powering industry, heating homes and underpinning the scale-up of renewables by keeping the lights on when the wind isn’t blowing and the sun isn’t shining.
'It represents an investment opportunity compatible with the Climate Change Committee’s net zero plan and is perfectly aligned with the UK’s vision for economic growth, energy resilience and enhanced job and supply chain opportunities during the energy transition.
'At the coming budget, we urge the Government to demonstrate leadership and clarity by implementing a balanced set of fiscal and licensing measures which restore investor confidence in this world class sector.
'Failure to do so now will cause irreparable damage to the UK’s commitment to a just transition.'
Source: OEUK
