RE: West Newton said NO!10 Mar 2022 09:44
“ Wait for the penny to drop.”
You might be waiting a while.
The political reality is this:
The UK has demonised fossil fuel production for the last 5 years or more. This aligned with the political reality in that UK oil and gas no longer became a net contributor to tax as fields were abandoned and companies reclaimed previously paid tax from the Government. the Yurt Dwellers then like to claim the government was”subsidising” fossil fuels, rather than the simple fact they were treating them exactly the same as any other corporation. The difference being of course that oil and gas has always been taxed at much higher rates (with one small exception in the late 90’s) and so the amounts reclaimed are proportionally higher.
Now the cat is out of the bag on this flawed approach and there’s all this talk of issuing more licences and approvals… - all hollow words.
With the exception of a couple of gas/condensate field caught up in the COP26 messaging period, there’s nothing material that can be brought on stream quickly that wasn’t already underway. It takes on average 3-5 years to bring a stand alone field on stream from the point you decide to develop it, which in itself takes 3-4 years from the award of a licence. The only exception being subsea tie backs to existing infrastructure which could be done in about 18 months give or take. Exploration in the UKCS is almost zero, and the only players are now Private equity backed who don’t care for such risky business models, preferring to take the cashflow, play the oil/gas price and cut costs.
So whilst gas has recently hit £8+ a therm from a previous level of 50p or less, there is simply no short term home grown solution. -expect a push to self sufficiency for both fossil fuels but mostly renewables. (Nuclear and Wind combined with a mass energy storage mechanism)
In this context the average Northern Householder near Wressle /West Newton or any other site will understand that the only people to materially benefit will be the shareholders of those companies, as the impact on prices they will need to pay from these fields is a big fat zero.
That political reality simply means that a SHORT TERM windfall tax on oil and gas producers is inevitable as the voting public will simply not tolerate average fuel bills of £3k and oil and gas making super profits. A short term hit will not be welcomed by the industry, but expect this to be sweetened by longer term tax reductions to encourage more homegrown production in the medium term.
Be careful what you wish for…
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