UK windfall tax would weigh on N Sea future: Harbour

A windfall tax on UK oil and gas producers' profits would have consequences for the future of investments in the UK North Sea and would be "detrimental" for the energy transition, according to Harbour Energy's chief executive Linda Cook.

Speaking at the OEUK conference today, 24 May, Cook said she was surprised at media reports about ongoing talks on a possible windfall tax, but said she was grateful for UK government support of the oil and gas industry, which "is not always popular".

The UK government is facing a dilemma on how to tackle rising consumer energy bills — the regulator today said the household gas and electricity price cap may increase by 40pc in October — with a windfall tax on profits achieved during the time of high oil and gas prices one possibility. A motion to impose a windfall tax was defeated in parliament recently, but finance minister Rishi Sunak has since said all options are "still on the table".

"Higher taxes mean we have less funds available to invest," Cook said. "This is at a time when we are being encouraged to increase domestic oil and gas production and to fund projects to support the energy transition." She said higher taxes limit the industry's ability to raise debt and equity, and weakens balance sheets.

Harbour Energy is the largest UK-listed independent, with production of 199,000 b/d of oil equivalent (boe/d) from UK assets during the first quarter. Its main focus this year is its operated Tolmount field, where an output ramp-up to 40,000 boe/d is under way.

"Government rightly has an expectation that our industry will deliver on commitments to participate in the energy transition to boost investment and improve energy security," Cook said. "In return, we ask for a stable regulatory and fiscal environment, one which enables us to make the long term decisions required to continue to provide domestic oil and gas, while also investing for a lower carbon future."

She said a windfall tax would lead to fewer projects being sanctioned, and fiscal instability would create uncertainty that would make the UK less attractive for investors in the long term.

OEUK chief executive Deirdre Michie said the UK energy industry was facing "the threat of punitive taxes and regulations, just at a time when the UK needs to focus on long-term issues like energy security and working for net zero". She said the industry needs stability to invest and create jobs.

Michie said the benefit of a windfall tax would probably fade faster than the damage it could cause, in the form of declining investments and production levels.

By Caroline Varin