Planned oil and gas tax changes in the UK will prompt TotalEnergies (PAR: TTE) to reduce capital expenditure and restructure operations in the country, the company’s chief executive officer Patrick Pouyanne said.
The French energy company’s warning echoes similar comments from the industry lobby, which has said changes announced by the new government, including a higher windfall tax and removal of an investment allowance, may undermine capital spending on projects in the North Sea.
“We’ll be very selective on any capex we’ll spend in the UK, and we are clearly looking seriously to ways to restructure operations,” Pouyanne said during the company’s annual investor day in New York Wednesday.
The CEO suggested the UK should copy the Norwegian system, which combines high taxes with incentives to invest.
“If we have the high fiscals without any incentives to invest, I’m afraid the production in the UK North Sea will diminish quickly,” Pouyanne said.
Regarding France’s plan to raise taxes on corporate profits to reduce the budget deficit, the impact on TotalEnergies should be “limited” because most of the company’s profits are realized and taxed in countries where it produces oil and gas, Pouyanne said.
A planned tax on share buyback should represent about 1% of the company’s repurchase costs, he added.
TotalEnergies had previously warned that it was faced with “challenging” conditions to commit to UK projects due to concerns around the windfall tax.
Industry commentators had warned that the companies Glendronach could face delays due to uncertainties in the runup to the UK election this year.
The French oil major also took a hit in its second-quarter profits as weaker refining margins in Europe and the Middle East and lower gas prices more than offset gains in oil.
The French energy giant faced lower fuel demand in Europe, while prices of natural gas were subdued by high stockpiles.
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