The North East energy industry supply chain can take confidence in new measures designed to spread the benefit of renewables work, the Minister for Business Energy and Enterprise has told the region.
Matthew Hancock was responding to criticism of the UK government by Dutch firm DeepOcean which was forced to shed jobs from its North East operation in January, citing the propensity for offshore wind work to go to firms with little UK presence.
Speaking to The Journal before his address of the NOF Energy organised Energy: A Balanced Future conference at the Sage Gateshead yesterday, Mr Hancock said the offshore wind industry review recently carried out by Matthew Chinn provided the base for UK companies to act on opportunities.
He said: “We’ve brought in supply chain plans for renewable energy companies. They have to be in line with European rules, but these plans have been introduced for the first time, and we should see their benefit to UK companies.
“We actually rejected plans that weren’t strong enough. We’ve got a good policy in place to make sure the whole supply chain benefits from offshore renewables developments. The opportunities are there and the recent result of wind farm auctions shows that juice has gone into the other end of the pipeline.”
In his speech to delegates of the international energy conference, Mr Hancock said it was more “substantive” to make sure the UK supply chain was competitive than prioritise UK content.
In light of the recent oil price crash and calls for the Government to step in and protect North Sea industry, the Minister remained tight-lipped on next week’s Budget – but offered a strong indication that further fiscal measures were on the way.
He added: “We’ve already introduced a range of fiscal measures to stimulate further investment in the UKCS.
“These measures have been successful, with almost half of the record £14bn investment in 2013 incentivised by field allowances. And we all look forward to the Budget next week.
“But industry can’t just wait for fiscal changes. This is a partnership, and we need industry to step up and address rising operating costs and reverse recent declines in operating efficiency.”
Nigel Lees of Wood Group PSN, the provider of brownfield services to oil and gas operators, also spoke at the event and said his industry must rein in costs if it is to be economically sustainable.
Mr Lees said the cost of production per barrel of oil was currently £18.50 but by the end of the decade that could escalate to £60 per barrel.
He said: “We are waiting on a budget which will provide a long-term understanding of the industry but one that might not make a difference immediately, today. We should embrace the fact that Government is behind this industry.”
Mr Hancock added: “We’re helping industry to cut costs with the new Oil and Gas Authority. There is a very clear message we are hearing – and one we’ve understood – that fiscal action is needed as well.
“Money is tight in Government too, so it’s a difficult ask, but we understand how important this is not just to Scotland but the whole of the east coast.”
Touching on the recent Department of Energy opposition to the purchase of North Sea oil assets by Russian oligarch Mikhail Fridman and his vehicle LetterOne, Mr Hancock said: “We’ve clearly got some strong sanctions in place, which have been agreed at a European level.
“We’re open to investment from around the world, but at the same time we’re also big supporters of the sanction regime on Russia because the protection of international borders is a vital part of our global security.”