Great Britain creates £2bn energy fund — OilPrice
The UK government has launched the £2 billion Energy Wealth Fund, which will direct tax revenues from North Sea oil and gas toward renewable energy and low-carbon infrastructure, OilPrice reports.
Fund within the National Wealth Fund
The new mechanism will operate within the National Wealth Fund. Unlike Norway’s Government Pension Fund Global, which primarily invests abroad and helps finance public spending, the British fund will direct money to domestic projects in renewable energy and low-carbon infrastructure.
Chancellor John Healey said the UK’s remaining hydrocarbon resources should help finance the industries of the future. The fund was announced at the same time as the government approved Shell’s Jackdaw gas project in the North Sea.
According to the government’s estimate, at peak production Jackdaw could increase domestic gas production in the UK by about 6%, support hundreds of jobs and add around £2.9 billion to the country’s economy over its operating life.
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Comparison with Norway
According to UK Treasury modelling reported by the BBC, the country could have accumulated a sovereign fund of about £1 trillion if it had invested the historical £200 billion in tax revenues from North Sea oil and gas, earned returns comparable to Norway’s and not withdrawn the funds. Instead, those revenues were spent by previous governments.
Norway’s Government Pension Fund Global received its first capital transfer in 1996 and has grown to approximately $2.4 trillion thanks to oil revenues and investment returns. At the same time, declining production in the mature North Sea basin may limit the British fund. The government also maintains its intention to stop issuing new exploration licences, although existing projects will continue to operate.
Industry organisation Offshore Energies UK welcomed permission to develop Jackdaw and called on the government to approve additional projects. The organisation said potential investment in the North Sea exceeds £50 billion.
