British oil and gas producers on Thursday warned Prime Minister Rishi Sunak that a new tax on their profits could force the cancellation of projects and spur investors to deploy their capital. in other place.
At a meeting with Sunak in Aberdeen, around 20 executives from companies with UK North Sea operations – including Equinor, Harbor Energy, Ithaca Energy and Shell – highlighted the negative consequences of the move. 25% of the prime minister. “Energy profit”.
Sunak revealed corporate income tax in May to partially fund a £15 billion support package for UK households Struggling with soaring energy bills.
Simon Roddy, Shell’s senior vice president of upstream oil and gas business in the UK, told Sunak the levy sent a “negative signal” that was undermining investment in UK waters. , according to people present at the meeting. It increased the title duty paid by North Sea oil and gas producers to 65%.
An executive at Norwegian state-backed energy company Equinor has suggested to Sunak that it is questioning whether the UK is a reasonable place to invest, with several at meeting said.
Equinor is leading one of the UK’s most anticipated investments in the North Sea, the £4.5 billion Rosebank oil and gas field, 130 kilometers northwest of the Shetland Islands. Equinor said it then committed to transferring Rosebank and intends to make a final investment decision in the spring of 2023.
An executive at London-listed Serica Energy told Sunak that the wind tax would disproportionately harm smaller oil and gas producers than their larger rivals, which have major global asset portfolio.
Executives have asked Sunak to make a number of key commitments, including a six-month corporate income tax review. The tax has a provision called twilight and will phase it out by the end of 2025.
The industry also wants more clarity on what could be the cause of the removal of the import tax.
When Sunak announced its energy profit margin, the Treasury Department described it as “temporary” and said it would “be phased out as oil and gas prices return to more historically normal levels.” .
This month, he pointed out that a drop in prices to the $60 to $70 a barrel range could be the cause of the tax repeal. Brent crude was trading at $111 a barrel on Thursday.
Regulators also want carbon capture and storage projects to qualify for the new investment support that Sunak has announced alongside the levy. The subsidy is intended to give companies an incentive to push ahead with plans to boost UK oil and gas production.
But an executive at a meeting with Sunak in Aberdeen said the prime minister “lacks answers to key industry questions”.
Another person with knowledge of the meeting with the prime minister said: “He finds himself getting some pretty strong feedback.
“The relationship between Treasury and the oil and gas industry can be described as several layers of frost.”
Deirdre Michie, chief executive of North Sea trade body Offshore Energies UK, described the meeting with Sunak as “frank” and warned imposing tariffs would undermine efforts to attract investment into the UK.
Shell, Serica Energy and Harbor Energy declined to comment.
A government spokesman said its energy security strategy laid out how “North Sea Oil and Gas will play an important role in the UK’s domestic energy supply and future security”. near future – so it is right for us to continue to encourage investment there.”
The spokesman added that the investment subsidy of this tax “means businesses will generally save 91p in tax for every £1 they invest – this is almost double the existing tax relief”.