Oil and gas producers warn windfall tax would do long-term harm to industry

Offshore Energies UK, which represents the offshore oil and gas industry, said the tax would undermine investor confidence.

Dan Barker
Wednesday 25 May 2022 22:00
An oil rig anchored in the Cromarty Firth, Invergordon (Jane Barlow/PA)
An oil rig anchored in the Cromarty Firth, Invergordon (Jane Barlow/PA)

Rishi Sunak has been warned that a windfall tax on energy firms would see higher prices and do long-term damage to the oil and gas industry.

Offshore Energies UK (OEUK), which represents the offshore oil and gas industry, issued the warning amid speculation the Chancellor is set to implement the one-off tax on the profits of the energy companies.

Deirdre Michie, chief executive of the body, said: “This is an industry that thinks and plans long-term, so sudden new costs, like this proposed tax, will disrupt planning and investment and, above all, undermine investor confidence.”

Deirdre Michie, chief executive of OEUK (OEUK)

Profits of energy companies have been boosted by the surge in oil and gas prices in the wake of Russia’s invasion of Ukraine.

Critics have argued energy firms are benefiting from a spike beyond their control and a year-long, one-off levy on their profits could help pay to support squeezed households.

But Ms Michie said it was already the country’s most highly taxed industry, paying 40% on their offshore profits, and operators would send the Treasury £7.8 billion this financial year. This, she said, was equivalent to £279 per household.

She added that the industry was “actually very proud to pay our taxes” but warned “the problem is when new taxes are imposed suddenly and without consultation”.

“The UK offshore industry needs a stable and predictable regime. A windfall tax may not affect projects already under way – but is likely to deter investments under consideration, for which funds have yet to be committed,” she said.

“The result would be a decline in oil and gas production in years ahead – just when the UK most needs reliable sources of energy.”

Mr Sunak told the House of Commons last week the UK Government “do not believe that windfall taxes are the simple and easy answer to every problem”.

“However, we are pragmatic, and we want to see our energy companies, which have made extraordinary profits at a time of acutely elevated prices, investing those profits back into British jobs, growth and energy security,” he said.

“I have made it clear and said repeatedly that, if that does not happen soon and at significant scale, no option is off the table.”

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in