Treasury woos bankers to drum up support for oil and gas projects
THE Government will seek to woo banks and other financial institutions next week to secure support for North Sea oil and gas projects, The Mail on Sunday understands.
Treasury officials have invited several major banks to a meeting on Friday as part of a charm offensive to convince them to restart investments in the region, which has seen its profits hammered by the Government’s windfall tax.
Those thought to be invited include Barclays, Lloyds and NatWest as well as investment firms Fidelity and Abrdn. Foreign banks such as America’s Wells Fargo, the Netherlands’ ING and France’s BNP Paribas and Societe Generale have also been approached.
But only a handful of those on the guest list are expected to attend, according to a person familiar with the matter, as many institutions including Barclays, NatWest and HSBC are already thought to have exited the region completely or scaled down their investments.
A key factor, aside from the windfall tax, is growing pressure on banks to adhere to environmental, social and governance (ESG) criteria, which aims to encourage firms not to make investments in controversial industries such as fossil fuels and defence.
BP boss Bernard Looney has said he plans to invest £18billion in the UK over the course of the decade, while Shell has promised to inject £25billion into the sector. But these investments could now be at risk, as the declining pool of funds and rising tax bills have put the brakes on several North Sea projects.
These include the Perth Area, a licence thought to contain the equivalent of 55million barrels of oil that was abandoned by its operator, Parkmead, in June with the group citing ‘significant concerns’ over UK tax policy and ‘a lack of public and political support’.
It could also imperil projects including Rosebank and Cambo, the UK’s largest untapped oilfields. An industry source told The Mail on Sunday: ‘At a time when the UK needs secure supplies of gas from the UK’s North Sea, it’s a damning indictment of the Government’s energy and fiscal policy that the banks who profit from the country will not invest back into it.
‘If UK banks continue to refuse to finance them, the country’s energy security and net zero targets will be at risk, condemning customers and businesses to higher costs, higher carbon emissions and less secure imports. This week, the
Government must give assurance to the banks that investment in the country’s energy market will not be at risk in the same way.’
Financial firms are ever more averse to investing in British fossil fuel projects in the North Sea after Rishi Sunak imposed a 25 per cent levy on profits from the sector as Chancellor. The tax was then raised to 35 per cent by his successor Jeremy Hunt.
The decision came amid growing public anger over the profits of oil and gas firms, which boomed after the invasion of Ukraine sparked a surge in global energy prices.
But the levy has proved unpopular in the industry, with many firms arguing that it has hit UK investment and left the country more reliant on imported energy.
Linda Cook, the boss of Harbour Energy, the largest oil producer in the North Sea, has said its profits last year were ‘all but wiped out’ by the tax, forcing it to cut hundreds of jobs. And Londonlisted EnQuest has halted drilling at its Kraken oilfield as a result of the levy. The Government has since tried to draw firms back, with Sunak last month promising to grant hundreds of drilling licences from the autumn.