Government pursuing ‘confused’ approach to energy transition
The UK’s “confused” energy strategy is more about slogans than results and risks hollowing out the local economy in Aberdeen, the boss of one of the UK’s largest energy services firms has said.
John Heiton, who has run the offshore specialist OEG for over 16 years, told City PM the government is adopting a jumbled approach to growing the economy that has jeopardised the UK energy sector’s regional dominance.
“[The government] is pursuing a confused message to prioritise growth,” Heiton said. “It is turning off some of the very projects that would produce growth in the next five years, while the Heathrow [runway expansion] would only produce growth in the next 15 to 20 years.”
The government put an end to new oil and gas projects in the North Sea on entering office as part of its quest to make the UK a “clean energy superpower”.
A core part of its plan to meet the country’s annual demands with clean energy by 2030 is the establishment of Great British (GB) Energy, a state-owned clean energy company funded by a windfall tax on North Sea oil and gas firms.
But despite OEG, which provides equipment to both offshore wind and oil and gas projects, potentially standing to gain from the ramp up of investment in wind power that GB Energy hopes to provide, Heiton was not convinced by the early signs of state-owned venture.
“It feels like a slogan, really,” he said. “I’m still a bit confused about what they’re going to do. It’s not like there’s a lack of people investing in offshore wind in the UK already. I didn’t see a hole that was there for GB Energy to fill.”
Heiton’s comments come just days after GB Energy’s new chairman conceded it could take 20 years for the taxpayer-funded organisation, which will be headquartered in Aberdeen, to provide the 1,000 jobs the government promised voters.
In an interview with Sky News, Jeurgen Maier said it the full benefits of GB Energy would not be realised for “decades”. But Heiton told City PM that unless the government reassessed its approach to domestic production now, Aberdeen’s historically vibrant local economy was at risk of being “hollowed out”, as firms relocate their operations to cities that have retained their oil and gas industries.
“Most people in Aberdeen are spending most of their days working on international projects, and so [if we lost our domestic market] why keep them here? If you haven’t got that domestic market then you’ll lose that cluster effect,” he said.
“[Aberdeen] is already looking a bit like a hollowed out city,” he added. “There are office parks with no-one in them. That’s not a good sign.”
Since Heiton took over Aberdeen-headquartered OEG in 2008, the firm has grown from a small, energy services boutique with 11 staff to the one of the world’s largest specialist equipment providers, employing 1,300 staff.
Fuelled by private equity funding from Dutch dealmaker KKR and now US investment behemoth Oaktree, it has put pen to paper on some 14 acquisitions since 2020 as it muscles up for the transition to renewables.
It has set itself an ambitions revenue target of $1bn (£799m) by the end of the decade, almost all of which, Heiton said, would come from its expansion into services for offshore projects across the globe. But the boss still questioned the environmental logic of divesting from oil and gas in the UK at a time when the UK still needs to import it.
“What a country uses doesn’t reflect what it produces,” he said. “I don’t think it adds to our emissions if we produce the oil ourselves.
“If we were producing the gas itself compared to, say, getting it from Qatar or elsewhere in the world, then it would seem better to do it that way, and wouldn’t change the usage.”
The Department for Energy Security and Net Zero has been contacted for comment.