Windfall tax pressure
Kwarteng urges oil firms to step up North Sea investment
Business Secretary Kwasi Kwarteng has written to North Sea oil and gas firms demanding they reinvest profits to accelerate domestic production.
Mr Kwarteng’s call comes amid growing pressure on the UK government to introduce a windfall tax on energy firms to ease the cost of living crisis on households.
It is also days before the majors are expected to reveal big profits on the back of rising oil prices.
Mr Kwarteng says that investing in domestic energy production will grow the economy and reduce the UK’s dependency on imports, especially from unstable sources.
“In return for the UK Government’s ongoing support for the sector, the Prime Minister, the Chancellor and I want to see a very clear plan from the oil and gas industry to reinvest profits in the North Sea and, importantly, in the clean energy technologies of the future,” he says in his letter (see below).
“At our next meeting in coming weeks, I would like you to set out how you will reinvest profits, double down on investments in the clean energy transition and importantly accelerate and maximise domestic oil and gas production.”
BP’s shares are up by more than a third in the last 12 months after Brent crude and natural gas rose by two-thirds and 150% respectively in the past year.
But further out, BP and Shell will also take a hit from also offloading assets in Russia and both have been focused on selling assets and paying down debt, preferring to return excess cash to shareholders rather than embarking on lavish capital investment projects or acquisitions.
Ministers have publicly resisted pressure to introduce a windfall tax, but Chancellor Rishi Sunak last week suggested he could be swayed to change his mind.
“If we don’t see that type of investment coming forward and if the companies are not going to make those investments in our country and in our energy security, then of course that’s something I would look at,” he said during an interview with Mumsnet.
Ed Miliband Labour’s Shadow Climate Change and Net Zero Secretary said: “After months of opposing the windfall tax tooth and nail, the Government is rattled because they are losing the argument.
“They are panicking ahead of financial results next week which will show oil and gas producers making soaring profits, at the expense of consumers paying soaring bills.
“It does not need a letter to find out what the oil and gas companies are doing with billions from their windfall profits, they are spending them on dividends and share buybacks.”
Aberdeen and Grampian Chamber of Commerce said last week that there is no need for a windfall tax as the Treasury has already banked £1.5 billion more in the first three months of 2022 than it did over the same period in 2021.
Mr Kwarteng’s letter