Record number of oil and gas firms go bust as renewable energy revolution begins to bite

The world’s largest private power production company warns the sector that renewables could drive the oil price as low as $10 a barrel

A fisherman collects spilled crude oil at the Pantai Teluk Penyu in Cilacap, Indonesia (Reuters)

A record number of oil and gas companies became insolvent last year, according to a new study which environmentalists said highlighted the need for the UK to prepare for the move to a low-carbon economy.

They warned that the loss of jobs in the sector when it becomes clear that fossil fuels can no longer be burned because of the effect on global warming would lead to “desolate communities” unless people were retrained to work in the “new industries of the 21st century”.

The study by accountancy firm Moore Stephens found 16 oil and gas companies went insolvent last year, compared to none at all in 2012.

After oil prices fell from about $120 a barrel to under $50 for most of the past year, smaller firms in the sector were unable to cope, Moore Stephens found.

Jeremy Willmont, who carried out the research, said: “The collapse of the price of oil has stretched many UK independents to breaking point.

“The last 15 years has seen a large increase in the number of UK oil and gas independents exploring and producing everywhere from Iraq to the Falkland Islands.

“Unless there is a consistent upward trend in the oil price, conditions will remain tough for many of those and insolvencies may continue.”

His report said North Sea oil producers were facing more “headwinds” because of the need to decommission a number of offshore rigs.

Dr Doug Parr, chief scientist at Greenpeace UK, warned the ultimate demise of the fossil fuel industry would create “desolate communities” unless the Government took steps to help the country move to a low-carbon economy.

“As the warnings from climate science get stronger, now is the time to realise – as a utility chief recently warned – that the future is not in fossil fuels,” Dr Parr said.

“It’s also time for Government to recognise that we should not leave the workers stranded, but provide opportunities in the new industries of the 21st century.”

The utility chief cited by Dr Parr is Thierry Lepercq, head of research at French energy company Engie, who recently told Bloomberg that the growth in renewable energy could push the cost of oil down to as low as $10 in less than 10 years.

“Even if oil demand continues to climb until 2025, its price could drop to $10 if markets anticipate a significant fall in demand,” he said.

Engie, the world’s largest private power production company, is increasingly investing in renewables and selling off coal-fired power stations and fossil fuel exploration rights.

The firm recently carried out research which found the Provence-Alpes-Cote d’Azur region, home to about five million people, could save 20 per cent on energy costs by 2030 by switching to 100 per cent renewable sources.

And Mr Lepercq added: “The promise of quasi-infinite and free energy is here.”

However Joseph Dutton, an associate research fellow with Exeter University’s Energy Policy Group, said fossil fuels would be around for some time to come.

“There’s a real battle between fossil fuels and renewables in power generation,” he said.

“But in terms of renewable transport, we are so far behind where we need to be to tackle climate change.

“In fuels and chemicals, I think fossil fuels are set to remain for the foreseeable future.”

And Mr Dutton said any oil and gas supplies held by the insolvent companies would have been taken over by larger companies.

“Their assets are being picked up by the bigger companies. It’s not as if they are falling out of the picture. The companies might be, but the oil and gas reserves are going to different companies,” he said.

“It may well be that what they hold will still be produced further down the line.”

“Whether this represents a shift away from fossil fuels to renewables is maybe too early to say.