Why even renewable energy firms are worried by speed of North Sea oil industry's decline

The energy sector in Scotland is in existential trouble. Not just oil and gas, but all aspects of domestically produced energy in this country. Our hopes of regaining energy independence are fading and, with it, thousands of Scottish jobs are at risk. All because energy policy in Scotland is, and has been for some time now, a total shambles.

Until you go to Aberdeen and speak to people there, you can’t understand what is happening with North Sea energy. I had the chance to interview people in the city and it opened my eyes.

I thought beforehand I would hear oil and gas companies complain in corporate terms about current energy policy, namely the energy profits levy (EPL) – a punitive tax placed on energy companies in 2022 to respond to a global oil issue following Russia’s invasion of Ukraine that persists to this day – and the ceasing of new drilling licences being issued.

READ MORE: Aberdeen’s OEG hails record $600 million revenue as wind power work surges

An oil rig is toward into the mouth of the River Tees ahead of dismantling (Picture: Ian Forsyth) | Getty Images

Tax rates of more than 100%

On the flipside, I expected renewables companies to be overwhelmingly positive about what was happening, talking about the number of green jobs that would be coming in the years ahead.

That wasn’t what I heard at all. I found out that oil and gas companies in Scotland can be paying tax rates of over 100 per cent, as the EPL is set at a headline level that taxes the profitable arm of a company, without allowing for deductions against any loss-making overheads of the wider business.

More surprisingly, renewables companies told me they were worried about the speed of decline of the oil and gas sector and stressed their inability to create jobs on the level needed in the timeframe required by current UK energy policy.

In other words, the message across the energy sector was uniform. The EPL is a bad idea, simply taxing the energy sector out of existence. There need to be new drilling licences. Finally, and possibly most importantly, the UK Government’s current ‘plan’ to transition to cleaner energy is at best deeply flawed, and at worst, non-existent.

READ MORE: These three Scottish business growth hotspots are in the UK’s top ten

Homelessness in Aberdeen

I undertook this work as part of a paper for the Jobs Foundation, a charity promoting employment as the best route out of poverty, called Cliff Edge. The report features interviews from key players within the Aberdeen energy sector and those feeling the secondary effects of a declining industry in the city – hoteliers, restaurant owners, as well as those dealing with things like the increase in homelessness the city is facing. These side-effects of a declining energy sector must be considered too.

The Autumn 2025 Budget was a great opportunity for the UK Government to at least correct the worst of current energy policy. It was sadly not taken up. This means time is fast running out, for Aberdeen, Scotland and the UK as a whole, on energy independence and the jobs that come with having a thriving domestic sector.

The jobs will go elsewhere. A lot of them already have. More people need to understand the cliff edge we are approaching on this. If we want to avoid falling off that cliff, both Holyrood and Westminster must turn the car around now.

Nick Tyrone is research director at the Jobs Foundation and author of Cliff Edge: Jobs in Aberdeen, the epicentre of the UK’s energy transition