Windfall tax warning to North Sea oil and gas

North Sea oil and gas companies could be hit with a windfall tax on profits if evidence is found of manipulation of the gas market, the chairman of an influential committee of MPs has warned.

Martin O'Neill, who heads the Trade and Industry Select Committee, said that even those companies not found guilty of any manipulation of the market would still be liable for any tax as they have still benefited from high prices.

The forward price for January delivery of gas in the UK is 55p per therm, around three times more than prices during the winter of 2002-03 and is the main reason why domestic and industrial fuel bills are soaring.

At the end of next month, the committee will begin hearings to question oil companies, including BP and Shell, over the steep rise in wholesale gas prices. This is despite the fact that an investigation by the energy regulator Ofgem earlier this month found no evidence of artificially inflated prices on the spot market.

Mr O'Neill told The Independent on Sunday:"If it becomes clear that through no fault of their own companies have been making significant profits [because of any manipulation of the gas market], we could use a windfall profits tax to help disadvantaged consumers."

He added that a tax would only be levied if it did not have a damaging effect on companies' investment plans for exploration and production in the North Sea.

A spokeswoman for the North Sea offshore operators' association, UKOOA, said: "Any windfall tax would put investment and jobs at risk."