Sunak warned that energy levy will hit investment
Oil and gas industry leaders today warned the Chancellor that his new energy profits levy risks undermining attempts to attract capital investment to the UK.
Rishi Sunak told a meeting of about 20 senior figures in Aberdeen that he would go ahead with the levy that would see taxes rise on the industry from 40% to 65% – the highest rate of any UK sector.
The new rate has deeply concerned the industry because of the scale of the increase and the speed with which it was imposed.
Mr Sunak introduced the additional tax to pass on to hard-pressed consumers and other businesses hit by the cost of living crisis. He stressed that he understands the importance of the North Sea sector to the UK’s domestic energy supply, particularly in light of Russia’s invasion of Ukraine.
But Deirdre Michie, CEO of trade body Offshore Energies UK, said the hard reality was that the new tax would undermine the industry.
She said: “The Energy Profits Levy is an unexpected new tax that changes the basis for investments. We had a candid and constructive meeting with the chancellor to discuss these issues and our industry leaders were clear about their concerns, especially the impact on investor confidence. Both sides have committed to further discussions.
“We will work constructively with the UK government and do our best to mitigate the damage this tax will cause but if energy companies reduce investment in UK waters, then they will produce less oil and gas. That means they will eventually be paying less tax and have less money to invest in low carbon energy.”
The UK’s oil and gas operators collectively produce about a third of the nation’s gas and the equivalent of three-quarters of its oil. Those resources have been a key factor in protecting consumers from the shortages hitting Europe following Russia’s invasion of Ukraine.
OEUK says those supplies are predicted to dwindle rapidly in the next few years as older gas and oil fields become depleted and argues that continued investment in new resources is essential to UK energy security.
North Sea rigs deal response to CMA concern
Noble Corp has struck a deal to sell five North Sea rigs to a newly created subsidiary of the jack-up drilling firm Shelf Drilling for $375 million in a move to satisfy competition concerns over its proposed merger with Maersk Drilling.
The Competition and Markets Authority said in April that the tie-up, announced in November 2021, could increase operating costs for oil and gas producers in the UK North Sea. It also felt the deal raised competition concerns in the supply of jack-up rigs for offshore drilling in northwest Europe.
The rigs to be sold are Noble Hans Deul, Noble Sam Hartley, Noble Sam Turner, Noble Houston Colbert, and Noble Lloyd Noble. Relevant offshore and onshore staff are expected to transfer with the rigs.