The biggest producer of oil and gas in UK waters has strongly objected to the government’s threats to levy a wind tax on soaring industry profits, warning it will cause some projects in the North Sea become uneconomical and could be “detrimental” to the country’s energy security.
Linda Cook, chief executive of the FTSE 100 Harbor Energy companies, warned the one-time tax would lead to the industry approving fewer projects at a time when ministers want to maximize domestic energy production to reduce the country’s dependence on imports, including from Russia.
“The higher tax burden will make it more difficult for new oil and gas projects to meet investment barrier ratios, which means fewer projects will be sanctioned. This is a time when industry is being encouraged to increase the UK’s domestic oil and gas production and support an orderly energy transition,” Cook told the Financial Times.
Her comments echo similar warnings from oil companies BP and Shell in recent weeks after business secretary Kwasi Kwarteng asked oil and gas producers to draw up a clear plan for how to reinvest their profits in the UK.
Last week, Harbor told Kwarteng that it plans to invest $6 billion in the North Sea over the three years to 2024. That includes $2.1 billion this year, up 20% next year. 2021.
Harbor, formerly known as Chrysaor, became one of the largest North Sea producers in 2019 after buying the UK property from the major US energy group. ConocoPhillips for $2.7 billion. It completed a reverse takeover of London-listed Premier Oil in 2021 and plans to pay off 200 million dollar first dividend as a public company this year.
Italy’s BP, Shell and Eni are among the few other North Sea producers that have responded to the UK government’s request. Others have so far declined to disclose any investment plans, including France’s TotalEnergies and privately-backed Neo Energy, two of the North Sea’s biggest producers.
The government is under pressure from the opposition Labor party to act, as opinion polls show overwhelming public support for a tax to help tackle the deepening cost of living crisis. But the message from the ministers was Mix.
Prime Minister Boris Johnson said on Monday: “None of the options are worth discussing, adding: ‘I’m not attracted by the new taxes by nature’.
Treasury Secretary Simon Clarke told Sky News a wind tax remained on the table “if we don’t see that investment materialize”, adding: “We’ve been very clear that there is a need There is a real need, at a time when the industry generates very substantial profits, to see those profits reinvested.”
The executives of several North Sea manufacturers have privately complained that it is impractical to dial investment numbers up and down rapidly to comply with the wishes of politicians, given the size and complexity. technical aspects of projects.
North Sea oil and gas producers will discuss how to deal with the wind tax at a conference in Aberdeen on Tuesday. Cook, who is set to give a speech at the summit, warned that could send investors heading abroad, even though the UK benefits from one of the oil and gas tax regimes. most generous in the world.
“Fiscal uncertainty creates uncertainty, makes these long-term investment decisions more difficult and makes the UK less attractive compared to other regions,” she said.
“While the decision on whether to implement a wind tax is left to the government, it has been clear to the oil and gas industry that such a decision could affect future investment in the UK’s North Sea. and is harmful to our domestic energy security and to the development of the UK. energy transformation ambitions,” she added.
Additional reporting by Leke Oso Alabi in London
