Centrica blames tax for Morecambe Bay closure

The backlash against the Chancellor's decision to impose higher taxes on energy firms continued yesterday after Centrica decided not to recommence production at a major gas field, citing the heavy tax burden.

The owner of British Gas said it had completed the planned maintenance on its South Morecambe gas field, but that it now expected it to "operate on a more intermittent basis".

"Decisions on when to run the field are made on a commercial basis, taking into account market factors, operating costs and earnings," a Centrica spokesman said.

"We welcome the ongoing dialogue the Government is having with industry around the damaging impact the increased tax levels have on North Sea gas security and investment. However, the increase in supplementary corporation tax means the South field is now taxed at 81 per cent. At this level of tax, profitability of Morecambe South field can be marginal."

Underscoring the impact of the tax, Centrica said that it would continue to monitor the situation, but that "if it makes more economic sense to buy gas for our customers in the wholesale market, we would limit South field production."

The field is one of the country's largest, and can produce around nine million cubic metres of gas a day. That equates to around 6 per cent of the country's annual gas requirements, or up to 12 per cent of residential gas demand, according to the company. Centrica said higher taxes affected "the trigger levels at which point we shut production and purchase gas from other sources". In other words, production at the field would only make sense if gas prices rose by more than would have been necessary before the tax increase.

Crucially, while much of the debate over the higher supplementary charge has so far focused on the potential impact on future investment, the news on South Morecambe puts the focus on current production.

Last month, Centrica's share price touched a nine-month low after it warned investors that the higher taxes meant its earnings would grow at a "more modest rate" than previously anticipated. The company added that it "no longer" expected to "maintain the previously projected high levels of investment in the UK".

The wider industry has also warned about the impact of George Osborne's surprise decision to raise the supplementary charge against the backdrop of rising oil prices at the time of the Budget in March.

Giving evidence before Parliament's Energy and Climate Change Committee last month, Malcolm Webb, the chief executive of the industry body Oil & Gas UK, said the move was "very, very damaging for investor confidence". Speaking after the session, Mr Webb said: "Our primary message... was that this increasingly mature sector needs careful handling.

"It cannot take shocks such as the recent tax hit... these reduce the UK's relative attractiveness for investors, who will now look to rival opportunities overseas, where their capital will earn better returns."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before