How to lose friends and investors
1 Apr 2011
The Coalition government is making few friends in the UK energy sector at present – judging by the reaction of the oil & gas industry to its Budget, and of investors to its renewables policies.
UK oil & gas leaders are hopping mad (see story) about the tax hikes in last week’s Budget, which included an increase to a top rate of 81% on production from mature fields.
The tax move has already halted major projects in the UK sector, with, for example, Statoil reportedly hitting the brakes on £3billion-plus plans to bring the Mariner field into production.
“Last week’s Budget is ill-informed and was constructed hurriedly and without proper thought of the potential impacts on investment, production and hence energy supply and employment,” said Malcolm Webb, chief executive of industry group Oil & Gas UK.
“This further example of extreme fiscal instability for major energy projects in the UK has severely damaged investor confidence” added Webb, who is soon to meet chancellor George Osborne to discuss these concerns.
A fly on the wall at that meeting might well hear the chancellor link the oil tax hike to his declared goal to make the Coalition “the greenest ever government” – only to have this argument undone by the latest industry statistics.
According to a US report (see story), UK-based investment in ’green’ energy projects slumped to around £2 billion in 2010, compared to some £7 billion the previous year.
Almost every other G20 nation recorded spending rises to generate 30% growth in the sector globally, said the study by Pew Charitable Trusts – a Philadelphia-based research group set up to inform US government policy.
The CAPEX decline pushed the UK down to 13th, just behind Mexico, in the global ’green’ spending league. This, the report suggested, reflected uncertainty surrounding the new UK government’s clean energy policies, which had caused investors to look elsewhere for opportunities.
