- Government Seeks Financial Support for North Sea Oil and Gas
- Major Banks Invited, but Some Already Reduced Investments
- Challenges Including Windfall Tax and ESG Criteria Impacting Investment
The Government will seek support from banks and other financial institutions for North Sea oil and gas developments next week.
Treasury officials have invited several major banks to a meeting on Friday as part of a seduction offensive to persuade them to reinvest in a region whose profits have been decimated by the government’s windfall tax.
Barclays, Lloyds, and NatWest, as well as investment firms Fidelity and Abrdn, are believed to be invited. Wells Fargo, ING, BNP Paribas, and Societe Generale have also been approached.
According to a source with knowledge of the situation, however, only a handful of those on the guest list are anticipated to attend, as many institutions, including Barclays, NatWest, and HSBC, are already believed to have left the region or reduced their investments.
In addition to the windfall tax, a significant factor is an increasing pressure on banks to adhere to environmental, social, and governance (ESG) criteria, which seeks to discourage firms from investing in controversies such as fossil fuels and defense.
The CEO of BP, Bernard Looney, intends to invest £18 billion in the United Kingdom over the next decade. While Shell has pledged to invest £25 billion in the sector.
Reducing money and rising taxes have stalled several North Sea ventures, putting these investments at risk.
These include the Perth Area, a license believed to contain 55 million barrels of oil, which was abandoned by its operator, Parkmead, in June, citing “significant concerns” over UK tax policy and “a lack of public and political support.
It could also threaten Rosebank and Cambo, the largest undeveloped oilfields in the United Kingdom.
An industry source told: ‘At a time when the UK needs secure supplies of gas from the UK’s North Sea. Because profit-making institutions won’t reinvest in the country, the government’s energy and fiscal policy is poor.
Should UK banks continue to refuse to finance them, the nation’s energy security and net zero goals will be jeopardized, exposing consumers and businesses to higher costs, higher carbon emissions, and less secure imports. This week, the government must persuade banks that their energy market investments are safe.
Rishi Sunak’s 25% profit tax has deterred financial institutions from engaging in British North Sea fossil fuel companies. The tax was subsequently increased to 35% by his successor, Jeremy Hunt.
The decision was made in response to escalating public outrage over the profits of oil and gas companies. Which soared after the invasion of Ukraine triggered a global surge in energy prices.
However, many firms argue that the charge has inhibited UK investment and increased the nation’s energy imports.
Linda Cook, the CEO of Harbour Energy, the largest oil producer in the North Sea, stated that the tax “virtually wiped out” the company’s profits last year, compelling it to eliminate hundreds of jobs. As a consequence of the levy, London-listed EnQuest has ceased drilling at its Kraken oilfield.
Sunak promised last month to give hundreds of drilling licences starting in the fall to attract firms.
