OIL sector leaders have warned that the UK’s energy transition could be under threat unless the Government can provide vital support for it.

Oil & Gas UK (OGUK), the representative body for the offshore oil and gas industry, has said securing the sustaining investment is now critical to help the UK realise a net-zero future.

Its 2021 Business Outlook showed the industry is facing a period of extreme uncertainty as it struggles to deal with the after-effects of the pandemic, which has heralded a significant decline in offshore activity and overall levels of expenditure – falling by more than a quarter in the last year.

However, despite the pandemic challenges and economic downturn, production from UK waters still managed to safely meet around 70% of the country’s oil and gas needs last year, demonstrating the continued need for an indigenous supply.

OGUK said there are also some early signs of improved sentiment emerging, with new investors continuing to be attracted by the remaining potential of the North Sea. It said to realise the UK’s shared climate goals and maintain affordable energy and a strong base for the UK’s energy supply chain to build from, it had reinforced that government policy and regulation must continue to prioritise domestic production over imported energy.

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Deirdre Michie, OGUK chief executive, said: “£3 billion worth of investment has been deferred from company plans in 2020 and 2021 – and the effects of Covid-19 have really undermined energy communities, causing a rise in unemployment and a slump in activity.

“A climate-friendly future needs significant investment in indigenous opportunities so companies right across the sector can continue to develop low-carbon solutions.

“That is why we are working with the Government to deliver a transformational North Sea transition deal, which will drive forward carbon capture and storage, hydrogen and low-carbon projects across the UK.”

She added: “This is an industry which continues to play a critical role in the economy, supporting hundreds of thousands of jobs in industrial heartlands across the nation, generating affordable energy for millions and providing billions in value to the economy.

“But we cannot continue on this trajectory without vital support. Companies are in a fragile state. We need the recognition that our industry is a key player in a successful energy transition – one which won’t be possible without the inclusion of our sector.”

Michie’s warning came after a weekend of speculation that the UK Government could impose a moratorium on new drilling in the North Sea – similar to a ban announced by Denmark in December.

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An English newspaper said UK ministers were considering the move as preparations continue for November’s COP26 climate conference in Glasgow.

OGUK’s sustainability director, Mike Tholen, said: “Any curtailment of activity by licensing constraints risks impeding the UK’s ability to deliver a net-zero future, damaging our domestic supply chain and increasing energy imports whilst exporting the jobs and skills.”

However, a source close to the issue told S&P Global Platts: “We think it’s very unlikely the outcome will be an outright ban on these licenses.”