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National
Katharine Hay & Peter A Walker

North east oil and gas industry is an ‘economic force for good’

A total of 87% of people in Scotland who responded to an energy survey said the UK should meet its demand for oil and gas from domestic production.

The research was led by advisory firm True North, which said the findings also reveal that energy companies operating in the North Sea are seen to have a “positive impact on the UK economy by a factor of five to one”.

The firm’s managing partner, Fergus Mutch, said despite the north east of Scotland facing scrutiny over its oil and gas industry, the region has “nationwide backing”.

This week, it was announced that more than 100 applications have been submitted to drill for new oil and gas in the North Sea.

The UK Government paused licensing for new oil and gas developments, which is reserved to Westminster, for three years while it hosted the UN climate change conference in Glasgow.

UK ministers, however, have said more licences would be made available because of the energy security crisis.

But the Scottish Government last week announced a presumption against new oil and gas exploration as part of its new energy strategy.

Scottish ministers say they can no longer support the previous position of “maximising economic recovery” of fossil fuel reserves.

Commenting on the survey results, Mutch said: “Its findings certainly throw up some challenges for both UK and Scottish governments, not least on how best to support an energy sector in transition through an ongoing crisis in global energy security.

“Nowhere is this approach facing more scrutiny than in the north east of Scotland, and it’s interesting to note that this region’s key industries have nationwide backing as an economic force for good and in leading the delivery of our domestic energy requirements, despite the Scottish Government’s announcement of a presumption against new oil and gas exploration as part of its new energy strategy.”

With a strong focus on the ongoing cost-of-living crisis, True North said the poll shows “overwhelmingly” that the Energy Profits Levy - or windfall tax - is viewed as an ineffective measure in reducing household energy bills or encouraging energy companies to diversify from fossil fuels into renewables.

“We know that the UK government’s windfall tax, however well-intentioned, is having a serious impact on investment decisions by energy firms at a time when certainty is needed,” Mutch added.

“People across Scotland harbour doubts about its efficacy in lowering their household energy bills, or in terms of encouraging energy firms to move away from fossil fuels towards renewables.”

Professor Sir John Curtice, an expert on social attitudes - who provided analysis of the results - said: “Despite the current debate about climate change, most people in Scotland think that the energy industry in Scotland has had a positive impact on the UK and Scottish economies, and that, for so long as the UK continues to need oil and gas supplies, they are best sourced from within the UK rather than via imports.

“Indeed, this is one topic on which both nationalist and unionist supporters largely agree.”

A Scottish Government spokesperson responded: “As a responsible government, we have set out a pathway, through our draft Energy Strategy and Just Transition Plan, to ensure a fair and just transition for our energy workforce, and to bring a new generation of skilled workers into a flourishing energy industry as part of a net zero Scotland.

“Given the North Sea basin is mature and production is already in decline, any other course of action would only serve to put jobs and our economy at risk.

“Reducing our energy consumption while ramping up our energy generation capabilities through renewables and hydrogen will mean that, in a net zero Scotland, we will not only be less reliant on importing oil and gas, but a net exporter of cleaner and greener energy to the rest of the UK and beyond.”

A Treasury spokesperson said: “The Energy Profits Levy strikes a balance between funding cost-of-living support while encouraging investment in order to bolster the UK’s energy security.

“We have been clear that we want to encourage reinvestment of the sector’s profits to support the economy, jobs, and our energy security, which is why the more investment a firm makes into the UK, the less tax they will pay.”

Meanwhile, Sir Keir Starmer said there will be no investment in new North Sea oil and gas fields under a Labour government.

The party's leader told a panel discussion at the World Economic Forum meeting in Davos that he wanted to find a new role for oil and gas in the energy transition.

“What we’ve said about oil and gas is that there does need to be a transition,” he commented. “Obviously it will play its part during that transition but not new investment, not new fields up in the North Sea, because we need to go towards net zero, we need to ensure that renewable energy is where we go next.”

Ryan Crighton, policy director at Aberdeen & Grampian Chamber of Commerce, urged the Labour front bench to come to Aberdeen to get a 'balanced view' from transition experts.

"I find it very hard to understand how Labour can form an energy policy given how little I know it has engaged with the industry," he said. "His support for renewables is welcome, but like the SNP last week, the position set out by Sir Keir suggests a fundamental misunderstanding of the energy transition, and the requirement for oil and gas to both bridge and fund it.

"The energy transition is going to take 25 years or more and there is quite clearly a sustained period of time where oil and gas will remain a crucial part of our energy mix.

"So, we have two options; to produce more domestically, with full control over the regulatory environment in which it is extracted; or to import an increasing amount of our energy, with the heavier carbon toll that shipping it from other parts of the world carries.

"The latter makes little economic sense, and even less environmental sense - and opinion polls are consistently showing that the public back this view," he added.

Offshore Energies UK external relations director Jenny Stanning added: “Policymakers need to remember that words have consequences – only this week we heard that another major North Sea operator is winding down UK investment.

“This damage must stop and that means we need to find a compromise – a pathway we can all agree on, and which is practical for the country.

“We will be actively seeking those discussions.”

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