RE: Norway threatens to abandon £4.5bn North Sea oilfield over windfall tax19 Jun 2022 17:55
Windfall tax ‘seriously flawed’, says North Sea oil and gas producer
Harbour Energy lobbies Rishi Sunak for changes to profits levy because of impact on smaller firms
The chancellor, Rishi Sunak
Rishi Sunak hopes the energy profits levy will raise £5bn to fund efforts to cut household bills amid the cost of living crisis. Photograph: Jonathan Brady/PA
Alex Lawson Energy correspondent
Sun 19 Jun 2022 13.26 BST
The biggest oil and gas producer in the North Sea has labelled the windfall tax on energy firms “seriously flawed” as it lobbied the chancellor for last-minute changes to the levy.
Rishi Sunak last month announced a windfall tax on oil and gas firms making outsized profits during the energy crisis, which he hopes will raise £5bn to fund efforts to cut household bills.
In a letter to Sunak, seen by the Guardian, the Harbour Energy chief executive, Linda Cook, called on the chancellor to urgently revise the proposals for the energy profits levy (EPL). The government hopes to put draft legislation in place by early July.
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Cook said: “While I appreciate the scale of the cost of living crisis in the UK, the EPL as currently proposed is, in effect, retrospective and disproportionately impacts the independent oil and gas companies which have recently invested the most to help ensure UK domestic energy supply.”
Cook asked Sunak for a “gateway approach” where the levy only applies to “companies who have actually realised windfall profits”.
Harbour, which pumps about 200,000 barrels of oil a day, was created from a merger of the private equity-backed North Sea operator Chrysaor and its heavily indebted peer Premier Oil.
Cook argues that the effect of the levy on smaller specialist exploration and production companies is “disproportionately large compared with the projected impact on major oil companies such as BP and Shell”.
Harbour’s share price had rocketed by more than 40% since the start of the year as investors bet on oil and gas firms. However, since April all of those gains have been wiped out as the windfall tax damaged investor sentiment.
Cook estimated the largest independent UK producers – including Harbour, NEO, Ithaca and Spirit – will pay out more than £2.5bn.
The levy will result in energy firms paying an additional 25% tax but Sunak has allowed companies to make tax savings worth 91p in every £1 on investments in the North Sea. The tax will be in place until “normal” oil and gas prices return, or by the end of 2025.
Companies are not allowed to reduce the tax with losses made in previous years or money spent on decommissioning North Sea oil platforms.
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Cook asked Sunak to “allow the offset of tax losses from past investment. Not doing so makes the levy, in effect, retrospective and penalises those who invested when commodity prices were lower.” She added: “Do not exclude decommissioning spend for EPL purposes. We are legally obligated to undertake decommissioning at
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