Investment alert

Harbour Energy cuts North Sea jobs over windfall tax

Harbour is the largest UK listed independent oil and gas company

North Sea’s biggest oil and gas producer Harbour Energy is cutting cuts in the wake of the UK’s windfall tax in a move that confirms concerns expressed by industry leaders.

The full extent of the cuts among the company’s 1,700 employees is yet to be determined, according to its website.

Last November the UK government hiked the Energy Profits Levy (EPL) on oil and gas companies from 25% to 35%, bringing the total taxes on the sector to 75%, one of the highest rates in the world.

The levy was initially introduced in May by Rishi Sunak while he was chancellor under former prime minister Boris Johnson.

Harbour, the largest UK listed independent oil and gas company, had already announced in December that it would review its capital allocation plans and did not take part in the recent oil and gas licensing round in the North Sea, although this did attract more than 100 bids.

Shares in the company were barely changed at the close yesterday, down 0.3% or 1p, compared to a 0.4% gain for the broader European energy index. They were down a further 8.1p (2.51%) to 315p in early trade today.

In a trading update today Harbour CEO Linda Cook said: “We remain committed to playing an important role in the continued supply of reliable and responsible domestic oil and gas in the UK. 

“However, while oil and gas prices have reverted to more normal levels we still face a tax rate of 75% in the UK due to the recent tax changes, making investment in the country less competitive. 

“As a result, the EPL necessitated a review of our future activity levels in the UK and reinforced our ambition to grow and diversify internationally.”

The company said its 2022 total capital expenditure of $1billion was in line with latest guidance and materially lower than the $1.3 billion forecast at the outset of the year.

“This was due to the decisions not to proceed with several North Sea exploration and appraisal wells as well as the delayed arrival of rigs at some locations. The weaker UK sterling to US dollar exchange rate was also a factor,” it said.

Offshore Energies UK and the Aberdeen and Grampian Chamber of Commerce have led warnings about the impact of the levy on investment in the North Sea and said it would undermine rather than support government plans for energy security.

In response to Harbour’s announcement, OEUK sustainability director Mike Tholen said: “These tax increases, and the threat of more to come, have made the UK a much riskier place to invest and so makes it far more likely that investors will look overseas instead.”

Companies including Shell and Equinor ASA have already said they will review their North Sea investments. France’s TotalEnergies SE said it would cut investments in Britain by a quarter this year.

Harbour’s UK offshore operated positions include Greater Britannia, J-Area, the AELE Hub, Solan, Catcher, the East Irish Sea and Tolmount Area in the southern North Sea. It has material non-operated stakes in numerous long-life assets including Clair, Buzzard, Beryl, Elgin/Franklin and Schiehallion.

Onshore, it owns the Rivers terminal at Barrow-in-Furness and has interests in the Sullom Voe oil terminal in Shetland.

Its UK pipeline system interests include the Central Area Transmission System (CATS), European Transmission System (ETS), the Shearwater Elgin Area Line (SEAL), the Graben Area Export Line (GAEL), the West of Shetland Pipeline System (WoSPS) and the Brent Pipeline System.

Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.