Harbour Energy chief executive Linda Cook joined industry heads in calling for a “stable” tax environment, and warned of the potential consequences for future North Sea investment should a windfall levy be imposed.
Speaking at the Offshore Energies UK (OEUK) annual conference in Aberdeen on Tuesday morning, Ms Cook echoed the trade body’s chief executive Deirdre Michie in warning that a windfall tax on oil and gas profits would harm the sector’s ability to invest in projects critical to energy transition and energy security.
“While the decision to implement a windfall profits tax is for the government, the oil and gas industry has been clear that such a decision will have consequences for future investment in the UK North Sea,” Ms Cook said.
The government has so far dismissed calls for the levy, but reports on Monday suggest plans are now being drawn up by the Treasury for a tax that would encompass electricity generators as well as North Sea oil and gas firms.
Ms Cook charted the “threefold” impact of such measures, noting that additional taxes meant companies like Harbour would have less funds available to invest, at a time when the sector is being encouraged to increase domestic oil and gas production and invest in the energy transition.
“They also weaken our balance sheets, limiting our industry’s ability to raise debt and equity,” she continued. “A higher tax burden makes it more difficult for new projects to meet investment hurdle rates – especially at a time when these projects are faced with material inflation and long lead times.
“This inevitably means fewer projects will be sanctioned.”
Finally, she said fiscal instability “creates uncertainty” which makes the UK a less attractive destination relative to other regions.
Ms Michie, meanwhile, spoke of the challenges faced by the industry which “has to think and invest in terms of years and often decades” placed against the “shorter pressures and deadlines” of politicians, the media and campaign groups.
“As a result, it means we are now facing the threat of punitive taxes and regulations, just at a time when the UK needs to focus on long-term issues like energy security and working for net zero,” she added.
She reiterated OEUK assessments that suggest the sector is set to invest £200-250bn in oil, gas and energy transition projects between now and 2030, adding that the threat of new taxes could undermine these efforts, disrupting “what could be a remarkable British success story.”
Ms Cook also highlighted Harbour’s role as a relatively new player in the region, which can acquire assets and infrastructure from more established companies and invest in prolonging their life.
Since its formation in 2014 as Chrysaor, the company has grown to become the North Sea’s largest oil and gas producer. Its most recent production guidance suggests it will maintain group-wide output of 195,000 to 210,000 barrels per day this year.
“All of this doesn’t happen without companies like us allocating the capital to reinvest,” she noted. “At Harbour we have a good track record of doing that.”
She said the UK government has an expectation of industry to deliver on its commitments to invest in these projects.
“In return, we asked for a stable regulatory and fiscal environment – one which enables us to make the long-term decisions required to continue to provide domestic oil and gas while also investing for a lower carbon future,” she continued.
