In a press release posted on its web site this week, business physique Offshore Energies UK (OEUK) mentioned Wednesday’s funds announcement extending the windfall tax on North Sea oil and gasoline producers is a disappointing blow to the business which dangers jobs, funding, and financial progress.
OEUK famous within the assertion that it has repeatedly identified that the value of gasoline within the UK is nearly 10 instances decrease than the peaks seen when the tax was launched and the value of oil has returned to the extent earlier than the Ukraine invasion.
The business physique additionally mentioned the Chancellor’s plan to proceed the tax undermines OEUK’s manifesto proposals for a homegrown vitality transition supposed to spice up home vitality funding and drive the shift to larger manufacturing of wind and hydrogen vitality, alongside the introduction of large-scale UK carbon seize and storage amenities.
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“The business is being taxed on windfall earnings which not exist and going through a fourth spherical of fiscal change and turmoil in lower than two years, making it not possible to plan funding for the vitality transition and the trail to internet zero,” David Whitehouse, the chief government of OEUK, mentioned within the assertion.
“We’re extraordinarily disillusioned that the federal government continues to disregard clear proof that we’d like funding in offshore vitality manufacturing to develop the economic system and obtain internet zero. We’ve recognized GBP 200 billion ($256.4 billion) of funding in oil and gasoline and the UK’s wider vitality transition awaiting the inexperienced mild which is not going to occur with such globally uncompetitive taxation in place,” he added.
“Hundreds of jobs and billions of kilos in nationwide income are in danger due to the destabilizing affect of those tax selections. A homegrown vitality transition will merely not transfer ahead except enterprise confidence for long run funding within the UK is restored,” Whitehouse continued.
In a press release despatched to Rigzone on Thursday, Graham Kellas, the senior vice chairman of world fiscal analysis at Wooden Mackenzie, mentioned, “the extension of the EPL [Energy Profits Levy] is a stunning alternative by the federal government because it is not going to generate any earnings for the federal government for at the least 4 years”.
“And a tax that’s now anticipated to have a seven-year lifespan underneath steady costs doesn’t abide by most definitions of a ‘windfall’ tax,” he mentioned.
Kellas added within the assertion that by retaining the present allowances and charges, the federal government clearly assumes that the extension is not going to change firms’ funding plans.
“Taken by itself – the extension of the EPL is unlikely to affect funding selections,” Kellas famous within the assertion.
“Nevertheless, the cumulative fiscal instability has actually unsettled North Sea traders. And, in an election 12 months, the opposition Labour get together’s tax plan has added considerably to the fiscal uncertainty,” he added.
Wooden Mackenzie highlighted in its assertion that its Lens database contains GBP 28 billion ($35.9 billion) of future capital expenditure within the UK, related to incremental spend on onstream belongings and the potential growth of 1.8 billion barrels of oil equal of extra oil and gasoline sources. It additionally famous within the assertion that the business has warned that each one this funding may very well be in danger, “due to the continued turbulence within the fiscal phrases”.
Rigzone has requested HM Treasury for touch upon OEUK and Wooden Mackenzie’s statements. On the time of writing, Rigzone has not but obtained any remark from the federal government division.
In his spring funds 2024 speech, UK Chancellor of the Exchequer Jeremy Hunt mentioned, “we are going to … legislate within the Finance Invoice to abolish the Vitality Income Levy ought to market costs fall to their historic norm for a sustained time frame”.
“However as a result of the rise in vitality costs attributable to the Ukraine battle is predicted to last more, so too will the sector’s windfall earnings,” he added.
“So, I’ll prolong the sundown on the Vitality Income Levy for a further 12 months to 2029 elevating GBP 1.5 billion ($1.9 billion),” Hunt continued.
The Vitality Income Levy (EPL) was launched on Might 26, 2022, to tax the distinctive earnings of oil and gasoline firms arising from unexpectedly excessive oil and gasoline costs, a coverage paper on the EPL on the UK authorities’s web site, printed in November 2023, famous. The EPL is charged at 35 p.c, bringing the entire headline price of tax on oil and gasoline earnings to 75 p.c, the paper acknowledged. The EPL was attributable to finish on March 31, 2028, that paper highlighted.
To contact the writer, e-mail andreas.exarheas@rigzone.com
