Trade body Offshore Energies UK has written to Chancellor Jeremy Hunt requesting an “urgent meeting” as it warns revisions to fiscal policy are scaring off UK energy investment.
Writing on behalf of the organisation and its members, OEUK chief executive Deirdre Michie said “ongoing uncertainty and continuous changes to the fiscal regime are driving investment out of the UK and also encouraging some companies to exit the basin.”
The warning comes amid reports on Monday that the UK Government is mulling an increase to its controversial Energy Profits Levy (EPL), upping it to 30% from its current 25%.
Under the proposals, the EPL could also be extended by another three years, despite Rishi Sunak pledging a “sunset clause” in 2025.
Ms Michie requested an urgent meeting ahead the Chancellor’s Autumn Statement to discuss the “signals” it had received on further sweeping changes to the levy.
“Companies are unable to plan future long-term investments under such uncertain conditions and shareholders, particularly in overseas headquartered companies see an increasing risk premium regarding the future of their operations in the UK.
“There is clear evidence that fiscal stability drives investment into the North Sea and fiscal uncertainty drives investment away from it,” she wrote.
As much was stated by OEUK member Harbour Energy earlier this year, with chief executive Linda Cook suggesting the group would accelerate efforts to diversify its portfolio in light of the additional tax burden.
OEUK also urged government to protect provisions for an investment allowance within the EPL measures, arguing it was “fundamental” for managing risk and supporting further investment in a mature basin.
“It is even more needed as tax rates rise and any changes could further undermine investor confidence. Additionally, any further tax changes being considered should be forward looking, and any amendments to the measure should not be applied retrospectively,” Ms Michie said.
Acknowledging the effects of spiralling energy prices on households and businesses, she said the sector was “committed” to remaining a “responsible energy partner” but called for a fiscal and regulatory regime that would allow the industry to invest.
“For the industry to be sustained, investment by smaller independent companies is desperately required in addition to that of the established majors,” she added.
“Generating sufficient profits from existing assets is critical for companies to continue to progress opportunities and develop new fields needed to enhance security of supply.”
Calls to increase the tax take from oil and gas firms have only grown in the wake of another tranche of whopping third-quarter profits.
OEUK has called for stakeholders and media to make a distinction between global oil profits and domestic profits – though many companies have declined to illuminate their specific figures for the UK North Sea within their financial results.
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