The UK’s energy security is under significant threat due to recent political policies. Serica Energy has voiced serious concerns over the impact of these measures on the offshore oil industry.
David Latin, chairman of Serica Energy, has criticised both the current government and the opposition for their restrictive policies, warning that these could lead to severe consequences for the nation’s energy stability.
Windfall Taxes and Political Instability
Serica Energy’s chairman, David Latin, has openly criticised the UK’s political landscape, describing it as the most hostile he has encountered outside of war zones. He highlighted the government’s windfall taxes, introduced in spring 2022, which he claims have created an environment of uncertainty, severely damaging investor confidence.
The Labour Party’s pledge to further increase these taxes and eliminate investment allowances specific to the oil and gas industry has exacerbated the situation. Latin argues that this move would isolate a single sector from common business tax reliefs, which could set a dangerous precedent for other industries in the future.
Impact on Oil and Gas Industry
Oil and gas producers in the UK face an overall tax rate of 75%, significantly higher than other UK industries. Despite the period of so-called ‘windfall’ conditions having long passed, with oil and gas prices stabilising, the high tax rates remain a burden.
Serica Energy criticises both the Conservative Party and Labour for their tax policies. The Conservative Party has not proposed tax reductions, while Labour suggests a hike to 78%. This could further damage the industry’s stability and investment appeal.
Consequences for National Security and Economy
Current political policies are predicted to lead to a reduction in oil and gas production in the UK. This could result in job losses, increased imports, higher overall emissions, reduced tax receipts, and weakened national security.
David Latin emphasised the ongoing dependency on hydrocarbons and the significant role they play in modern civilisation. He argued that producing these responsibly in the UK is better than relying on imports, which often come with higher environmental and social costs.
Additionally, the Supreme Court’s recent decision requiring planning authorities to consider downstream emissions when approving oil and gas fields is likely to drive the industry out of UK waters. This could further impact the nation’s energy security and economic stability.
Investment Shifts and Future Planning
David Latin announced plans to shift Serica Energy’s investments out of UK waters due to the burdensome and ever-changing tax and regulatory landscape. This decision underscores the challenges faced by the industry in making long-term investment decisions.
Latin warned that without continuous investment, even existing oil and gas fields would decline, affecting production levels. The main supply of investment must remain open to ensure the flow of oil and gas continues.
The Role of Hydrocarbons
Hydrocarbons continue to play a critical role in modern civilisation. Latin argued that it’s better to produce these resources responsibly under strict regulatory oversight in the UK than to rely on imports.
The benefits of domestic production include job creation, tax revenues, and lower environmental and social costs compared to imported hydrocarbons.
Political Environment and Future Outlook
The current political environment in the UK is seen as challenging for the oil and gas industry. Serica Energy’s stance highlights the need for a balanced approach to energy policy.
Without supportive measures, the industry risks facing further declines in production and investment, which could have long-term impacts on the nation’s energy security and economic stability.
Serica Energy’s Warning
David Latin’s criticism and warnings are a call to action for policymakers. Ensuring energy security requires a stable and supportive regulatory environment.
The concerns raised by Serica Energy reflect the urgent need for a balanced and supportive energy policy in the UK. Without it, the nation risks compromising its energy security and economic stability.
The government’s approach to taxation and regulation must be re-evaluated to ensure the continued investment and production in the oil and gas industry, which remains vital for the UK’s energy needs.