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North Sea’s largest oil and fuel producer warns in opposition to UK windfall tax

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The largest producer of oil and fuel in UK waters has pushed again strongly in opposition to authorities threats of a windfall tax on the business’s surging income, warning it could make some North Sea initiatives uneconomic and might be “detrimental” to the nation’s power safety.

Linda Cook, chief govt of the FTSE 100 firm Harbour Energy, warned a one-off levy would result in the business approving fewer initiatives at a time when ministers wish to maximise home power manufacturing to cut back the nation’s reliance on imports, together with from Russia.

“A higher tax burden will make it more challenging for new oil and gas projects to meet investment hurdle rates, meaning fewer projects will be sanctioned. This is at a time when industry is being encouraged to increase domestic UK oil and gas production and support an orderly energy transition,” Cook advised the Financial Times.

Her feedback echo comparable warnings from oil majors BP and Shell in latest weeks after enterprise secretary Kwasi Kwarteng demanded oil and fuel producers lay out a transparent plan of how their income could be reinvested within the UK.

Harbour advised Kwarteng final week that it deliberate to speculate $6bn within the North Sea over the three years to 2024. This contains $2.1bn this yr, a 20 per cent uplift on 2021.

Harbour Energy chief govt Linda Cook has warned {that a} windfall tax on oil and fuel producers might make buyers look overseas

Harbour, previously is aware of as Chrysaor, grew to become one of many North Sea’s largest producers in 2019 after shopping for the UK property of US power main ConocoPhillips for $2.7bn. It accomplished a reverse takeover of London-listed Premier Oil in 2021 and plans to pay its first dividend price $200mn as a public firm this yr.

BP, Shell and Italy’s Eni are amongst a handful of different North Sea producers which have responded to the UK authorities’s calls for. Others have to date refused to reveal any funding plans, together with France’s TotalEnergies and private-equity backed Neo Energy, two of the North Sea’s largest producers.

Bar chart of forecast production (kboed) showing Top 10 UK oil and gas producers 2022

The authorities is beneath strain from the Labour opposition celebration to behave, as opinion polls present the general public overwhelmingly again a levy to assist sort out the worsening price of dwelling disaster. But messaging from ministers has been blended.

“No option is off the table,” Prime Minister Boris Johnson mentioned on Monday, whereas including: “I’m not attracted, intrinsically, to new taxes.”

Chief secretary to the Treasury Simon Clarke advised Sky News {that a} windfall tax remained on the desk “if we do not see that investment materialise”, including: “We are very clear that there is a real need, at a time when the industry is making very significant profits, to see those profits reinvested.”

Executives at some North Sea producers have privately complained that it was not sensible to dial funding up and down shortly to adjust to the needs of politicians, given the dimensions and engineering complexities of the initiatives.

North Sea oil and fuel producers will talk about how to answer a windfall tax at a convention in Aberdeen on Tuesday. Cook, who is about to ship a speech on the summit, warned that it might make buyers look overseas, regardless that the UK advantages from one of the vital beneficiant oil and fuel taxation regimes on this planet.

“Fiscal instability creates uncertainty, making these long-term investment decisions more difficult and making the UK less attractive relative to other regions,” she mentioned.

“While the decision on whether to implement a windfall tax is for the government, the oil and gas industry has been clear that such a decision could impact future investment in the UK North Sea and be detrimental to our domestic energy security and to furthering the UK’s energy transition ambitions,” she added.

Additional reporting by Leke Oso Alabi in London

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