“Many” North Sea operators are now reconsidering their 2023 spending plans due to the windfall tax, the head of a membership group has said, with particular damage predicted to the supply chain.
Robin Allan, chairman of BRINDEX – an association of more than 20 independent operators including Harbour Energy, Ithaca Energy (LON: ITH) and EnQuest (LON: ENQ) – said he’s “not surprised” to see revisions as firms can no longer “safely plan on fiscal stability”.
The move will ultimately hurt the UK and its supply chain, Mr Allan warned.
He told Energy Voice: “The windfall taxes on our sector have already led many BRINDEX Members to reconsider their 2023 spending plans.
“This reduced expenditure will negatively impact and damage all of us but particularly damage the service sector in the UK”.
The comments come after Harbour Energy (LON: HBR), the top producer in the UK North Sea, said on Thursday it would shun the ongoing licensing round in the sector due to the levy.
Meanwhile oil major TotalEnergies, not part of BRINDEX, has said it will cut £100m from its 2023 spending plan due to the levy.
On behalf of BRINDEX (Association of British Independent Exploration Companies), Mr Allan wrote to the Chancellor Jeremy Hunt last month, prior to the levy increase, warning it would risk driving investment out of the UK altogether.
Last month the Chancellor increased the levy by 10%, to a headline rate for the industry of 75% of tax.
‘Manifestly unfair’
Although there is an allowance for new investment, companies without pipelines of spending are harder hit by the levy – Harbour Energy, which invested in new projects prior to the tax, is an example.
The 75% rate is “unlike any other industry in the UK” Mr Allan said, which he described as “manifestly unfair”.
“I have made clear to the Chancellor in writing and in person my dismay at the punitive tax regime that now exists in the UK, a tax regime which, if left unchanged, will be to the severe detriment of our country in terms of energy security, global emissions and industrial investment in the energy transition.
“I am not surprised that many companies in the UK are now reconsidering their investment plans; windfall taxes in any sector deter investment not just in that sector but also across other sectors; investors across all of the UK can no longer predict that their own sector will be able to safely plan on fiscal stability.”
© George Cracknell Wright/LNP/ShutCalls have been made to the Chancellor to revise the levy – in particular putting in place a price floor which would see it removed if oil and gas prices drop.
Industry leaders had a meeting with Jeremy Hunt on the issue last week, and Mr Allan said he hopes this isn’t falling of deaf ears.
Mr Allan “All of us hope that the Chancellor will amend certain aspects of the tax to avoid the cliff edge of no further investment in the UK British independent oil and gas companies are now paying 75% tax unlike any other industry in the UK. This is manifestly unfair and I just hope that he is not deaf to our plight.”
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