The UK’s offshore energy producers are to invest £200-£250 billion to provide the nation with secure and increasingly low carbon energy, according to research by Offshore Energies UK.
It has assessed the spending plans of offshore energy companies operating in the North Sea and other UK waters, looking at their investment plans between now and 2030.
The findings suggest around 60% of the investments will be spent building renewable and low carbon energy infrastructure, such as offshore wind and systems for capturing CO2 for permanent disposal in deep rock formations.
Such investments are just a fraction of what is needed for the UK to reach net zero – the point at which it generates no overall greenhouse gas emissions. The UK government’s target for achieving this is 2050. The Office for Budgetary Responsibility (OBR) has put the cost of reaching net zero at £1.4 trillion and has said £1 trillion of this money must come from UK companies.
Some companies have already set out their investment plans. Last month BP, one of the largest UK oil and gas producers, announced plans to invest up to £18 billion in the UK’s energy system by the end of 2030. Most of its plans are for offshore wind and other low-carbon projects such as mass hydrogen production and CO2 capture.
Where will the biggest investments come from?
OEUK’s research suggested that the biggest investments would come from oil and gas companies transitioning to low-carbon alternatives and that offshore wind would be the biggest beneficiary, including:
• £70 billion-plus in capital investment.
• £20 billion in operational expenditure – maintaining and operating wind farm infrastructure.
• Investment in people: Building a workforce skilled in constructing and maintaining offshore infrastructure is becoming a priority for offshore operators and their supply chains.
Other low-carbon technologies will attract billions more, including £20 billion in mass hydrogen production and carbon capture transport and storage plants.
Will investment in oil and gas continue?
Oil and gas will remain vital for many years, albeit in decreasing amounts, so energy companies are planning further investments to ensure the UK can meet as much of its own needs as possible.
This includes £25 billion to open new oil and gas fields or expand existing resources, £50 billion to maintain or improve existing infrastructure – much of which is ageing, and £15 billion to decommission infrastructure that has become redundant.
Such figures must be treated with caution as the spending plans of different companies are at different stages and not all are fully committed. However, based on past trends, the overall amounts are likely to increase significantly as time goes by.
The research coincides with a surge in the tax revenue being generated for the UK exchequer by the UK offshore sector. The OBR estimates that £20 million per day in UK tax is currently being paid by offshore oil and gas companies – more than double what they were paying a year ago.
Ross Dornan, OEUK’s market intelligence manager, who oversaw the research, said he expected to see offshore energy companies investing up to £150 billion in renewable and low-carbon projects, plus another £90 billion in oil and gas projects by 2030. Most of the investments would be from companies transitioning from oil and gas into low-carbon energy.
He said: “The UK’s energy companies are leading perhaps the most ambitious and far-reaching energy transition our nation has ever seen. They are providing the UK with energy now, mostly from oil and gas, while working to replace those fuels with low-carbon alternatives.
“It means we must invest in our existing oil and gas reserves to protect the UK against the global price spikes and possible shortages generated by crises like Russia’s invasion of Ukraine, while also spending billions on the energies of the future.
“The amounts being spent are far greater than any sums that might be raised by a windfall tax but what policymakers need to understand is the sheer scale, not just of the investments but also of the ambition. The UK could become a world leader in low-carbon and renewable energy – but to achieve that we need long-term thinking by planners and policymakers.
“Above all, we need a stable and predictable set of rules governing the way the industry is taxed and regulated.
“If those rules keep changing it will undermine confidence, drive investors away and make the UK’s net zero targets impossible to achieve.”