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Oil Majors Warn UK’s Windfall Tax Will Hurt North Sea Investment

Representatives of some of the biggest oil and gas companies operating in the North Sea on Thursday warned the UK’s Chancellor of the Exchequer Rishi Sunak that the new windfall tax on energy profits would undermine the government’s efforts to attract investment, industry body Offshore Energies UK said.

Oil companies operating in the North Sea, including Shell, BP, and Equinor, warned the Chancellor of the Exchequer during a meeting today that a windfall tax could slow investments in new oil and gas production in the basin, Reuters energy reporter Ron Bousso reports.

Moreover, David Cairns, representing Equinor in the meeting, told Sunak that the Norway-based major company has to decide on a major new oilfield development in 2023, but it “no longer knows if the UK is where we want to put our money,” Bousso reports, citing people who attended the meeting. 

Sunak met with 20 business leaders from the UK’s oil and gas industry in Aberdeen, the home of the UK North Sea oil and gas sector, and was told during a “candid and constructive” meeting that the industry was “deeply concerned” by the new tax rate, Offshore Energies UK (OEUK) said.

Following months of rumors and indecision, the UK government announced at the end of May a 25% Energy Profits Levy, commonly referred to as a “windfall tax”, as part of a package to ease the cost-of-living crisis stemming from huge rises in household energy bills.

The move has long been opposed by the industry, which argued that a windfall tax would add uncertainty to the UK tax regime and hit new investments in the UK North Sea at a time when the UK grapples with reducing reliance on foreign imports of oil and gas.

“The new rate has deeply concerned the industry, not only because it is so high but also because of the speed with which it was imposed. This sudden change in tax policy, Sunak was told, risks undermining the UK’s hard-won reputation for fiscal stability – a key factor for companies considering new investments,” Offshore Energies UK said in a statement today.

The UK government has yet to finalize the details of the windfall tax proposal, which is open for public consultation until June 28.  

By Charles Kennedy for Oilprice.com

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