Acorn’s £200m grant shift raises funding and revenue questions

By Priya Raman

£5.1 billion in forecast UK oil and gas production revenue for 2026-27 is the sum the SNP wants redirected to the Acorn carbon capture project in Aberdeenshire.

The SNP’s proposal has no stated UK government commitment behind it. Acorn’s £200 million grant package is changing, however. Existing support survives until year-end, while future help moves toward loans or equity.

What changed in the Budget?

Chancellor John Healey altered Acorn’s original £200 million grant award. The government had committed that sum at the last spending review. It now says it will offer the same value through loans (repayable financing) or an equity stake (shared project ownership).

Some grant money has already been drawn by developers, and the government says that spending remains in place under its existing commitment. The government insists the change applies only to future funding. Existing grant support continues until year-end. The remainder, plus future support, would move to loans or equity, with a taxpayer return required.

The SNP calls the change a betrayal, while First Minister John Swinney says he is deeply concerned. A government spokesperson said Acorn supports well-paid jobs and industrial rebuilding, adding that equity could bring government closer to the project and improve the taxpayer outcome.

Existing grant spending stays put, while new public money must earn a return.

Can the £5.1bn forecast pay for Acorn?

The Office for Budget Responsibility forecasts £5.1 billion in UK oil and gas production revenue for 2026-27. That figure includes:

• The Rosebank oil field, which has not received approval.
• Unspecified future discoveries, which also have not received approval.

Ministers have given the green light to Jackdaw. Rosebank is the much bigger project, and ministers have not decided it.

That mix makes the SNP proposal contingent because it combines an approved field, a pending field and unspecified discoveries, leaving Acorn exposed to decisions outside its control.

SNP Westminster leader Dave Doogan said North Sea receipts should fund Acorn. He said: “Every single penny from our oil and gas should be invested in Scotland and the starting point is the Acorn site in Peterhead.”

Doogan also accused the UK Labour government of banking revenue from Scotland’s resources while defunding what he called Scotland’s principal carbon capture project. He said Westminster had robbed Scotland of its trillion-pound future and diverted £5 billion to investments in England while damaging Scotland’s industrial future.

Doogan described the result as a simple injustice. He accused Westminster of taking, hiding and squandering Scotland’s energy while Scottish jobs suffered and energy bills rose. He also argued that independence would put 80% of UK oil and gas production and one third of UK renewable generation in Scottish hands.

The SNP’s case depends partly on a field and discoveries that have not received approval.

What must the Acorn project deliver?

Acorn’s plan would capture emissions from across Scotland and store them under the North Sea seabed, while the Peterhead project in Aberdeenshire could support about 15,000 jobs at its peak.

That employment number is a peak projection, not a current operating workforce. The funding announcement leaves several commercial questions unanswered. It does not disclose:

• Carbon capture and storage (CCS) capacity or injection rate.
• A construction start date or schedule for first carbon injections under the seabed.
• Contracted emissions volume or commitments from emitters.
• Capital cost beyond the £200 million support package.
• Whether the project has reached a final investment decision (FID), its formal go-ahead.

Those omissions complicate any assessment of what taxpayers would receive from loans or equity, while leaving Acorn’s operating scale harder to test at present.

Without capacity, schedule and contract data, the prospective public return cannot be tested.

Can loans and equity complete the financing?

On Sunday, UK energy minister Martin McCluskey said the government had to reprioritise budgets to prioritise defence. The government still supports Acorn, he said, but has changed the form of future assistance.

“Loans and equities are better value for the taxpayer,” McCluskey said. “It means that perhaps we could choose to take a stake in that project, which would give a return to the taxpayer.”

He gave two reasons for the change: better value for taxpayers and the possibility of a government return through ownership. He also described difficult choices needed to fund the defence investment plan, which the government treats as a priority.

McCluskey said carbon capture and storage programmes across the UK have been reprioritised, with some stopped outright rather than merely moving to loans and equities. He expects Acorn’s developers to bring proposals later this week. Funding remains on the table, he said.

The announcement sets no loan repayment term, interest rate, equity percentage, release condition or target return. It also gives no project startup date. The eventual terms will determine whether the revised model improves public value or simply replaces grants with other forms of public capital.

The watch item is Acorn’s funding proposal, due later this week, because undisclosed financing terms leave the project without a complete funding plan.