RE: oil price20 Feb 2023 16:22
Windfall tax rethink calls grow ahead of Budget
Calls have come from all angles for the government to rethink its stance on taxing oil, gas and renewable firms ahead of the spring budget
TotalEnergies SE - Windfall tax rethink calls grow ahead of spring budget
Oil and gas firms face taxes of up to 75%, but can gain lots of that back
Windfall taxes on North Sea oil and gas companies, as well as for electricity generators, should be abandoned in the spring Budget, due on 15 March, according to industry lobbyists.
Conservative MP John Redwood suggested the 35% windfall tax on oil and gas companies could ultimately lead the UK to relying more on imports in the future, while trade body Energy UK argued the levy for electricity generators risks the nation’s transition to net zero.
Warning companies were cutting back investments in the North Sea, Redwood said the hike from a 25% tax in January would mean “more oil imports, less UK tax revenue, fewer […] jobs and less growth”.
He asked: “Why so much self-harm?”
Energy UK boss Emma Pinchbeck alleged the government was in “danger of undermining its own ambitions” for a clean energy transition, meanwhile, by taxing electricity firms 45% on excess profits.
Emerging from the energy crisis “is a once-in-a-generation opportunity and if we don’t seize it [renewable investment] now, we will miss out not just on cheaper, cleaner energy but on the huge boost to our economy,” she said.
Harbour Energy and TotalEnergies have already said they would cut spending in the North Sea based on tax rises, which takes the marginal rate to 75%, while Shell and Enquest claim they would review operations.
RWE (ETR:RWE) also hinted it could redirect £12bn earmarked for renewable generation in the UK last week, given the tax on renewable companies selling energy above £75/MWh.
Firms in both cases can gain tax breaks, with North Sea producers able to get back 91% if they reinvest earnings and generators given money off based on operating costs.
January’s oil and gas licensing round saw Shell and BP among 76 companies that submitted 115 bids for new North Sea projects, up from 104 in 2019.
Both companies posted record profits in 2022 on the back of inflated oil and gas prices, hiked up by the Ukraine war, sparking some calls for further tax increases.
“The more money companies like BP make, the stronger the calls for them to give some of it back through tax,” commented AJ Bell analyst Russ Mould.
“The big oil companies have made a load of money while consumers and businesses have suffered from their energy bills going through the roof.”
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