Harbour Energy, the biggest oil and gas producer in the UK North Sea, is backing out of the ongoing licensing round aimed at awarding more than 100 new licenses due to the hike in the windfall tax on North Sea operators.
“As a result of the extension of the energy profits levy... we are reviewing investment levels and company-wide capital allocation,” a spokesperson for Harbour Energy told Reuters this week.
“This review is ongoing and, in the meantime, we have decided not to submit bids as part of this licensing process,” the spokesperson added.
Harbour Energy is the latest UK North Sea operator to announce a review of existing plans for investment in the area, after the UK raised the windfall tax on the profits of oil and gas operators by 10 percentage points to 35% from January 1, 2023. The UK also extended the so-called Energy Profits Levy to the end of March 2028, from December 31, 2025, as originally planned when the levy was 25%.
In September, the previous government of Liz Truss paved the way for more than 100 new oil and gas licenses in the UK North Sea as the UK focused on its energy security.
In early October, the North Sea Transition Authority (NSTA) – the UK’s oil and gas regulator – launched the 33rd offshore licensing round, with authorities looking at operators starting production after license awards as quickly as possible. In order to encourage that, the NSTA has identified four priority cluster areas in the Southern North Sea. Those areas have known oil and gas reserves, are close to infrastructure, and have the potential to be developed quickly.
However, the industry – which has balked at the windfall tax since it was first introduced by then Chancellor of the Exchequer Rishi Sunak who is now prime minister – is reviewing its investment in the UK, following the hike in the tax.
Shell said it would be re-evaluating each project comprising its $30.5 billion (£25 billion) planned investment in the UK energy system after Britain raised the windfall tax on oil and gas producers and slapped a similar tax on low-cost electricity generators. TotalEnergies has said it would slash its investment in the UK by 25%.
During a meeting with Jeremy Hunt last week, the leading industry body Offshore Energies UK told the current Chancellor of the Exchequer that a 75% total tax rate “will undermine the ability of energy producing companies to invest in the homegrown oil, gas and wind supplies we need. Without this, we will be less secure and will import more energy – while losing the benefits provided by the domestic industry in terms of taxes paid, jobs supported and investment in the wind and hydrogen projects.”
By Charles Kennedy for Oilprice.com
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