The UK Government is set to lose more than £750m in tax revenue if the controversial Rosebank oil field goes ahead, according to new analysis by climate campaigners.
The claim comes on the same day that Rosebank’s developer, Equinor, posted global profits of more than £15bn for the first six months of the year.
Environmental campaigners have accused the UK Government of selling the country short over huge subsidies to new North Sea fossil fuels developments that will not help lower bills or boost energy security.
The group has pointed to the majority of Rosebank’s oil reserves being exported and not used for domestic consumption.
Read more: MPs urge Rishi Sunak to 'plan to move beyond oil and gas' extraction
Rishi Sunak has been put under pressure by MPs to re-pledge his commitment to net zero and change course in pursuing the expansion of new fossil fuel developments in the North Sea.
A decision on whether Rosebank will be approved has reportedly been delayed due to concerns pver the proposals meeting climate targets.
According to analysis by the Uplift group. The potential loss to the Exchequer comes from the gap between the generous tax breaks being handed to Rosebank’s developers to kick start the project and the predicted tax payments from the profits of selling Rosebank’s oil reserves.
An investment allowance for new oil and gas developments, introduced by the Prime Minister last year, will see Rosebank’s developers, including Norwegian state backed oil firm Equinor, receive total tax relief of £3.75 billion to develop Rosebank.
But, according to the analysis, most of the field’s oil will be produced – and taxed – after the current 75% windfall tax period has elapsed, at the previous rate of 40%.
Read more: High Court told UK ministers failing to consider oil and gas emissions
Equinor has described the tax breaks as “helpful”, while the Institute for Fiscal Studies branded it a “huge tax subsidy”.
While the UK Government share of Rosebank will be negative – calculations by Rystad Energy also appear to show that the proposals have a negative net present value for the UK Government of -116% According to the study, the UK Treasury stands to lose more than the current estimate of £755 million if oil prices fall in the longer term, while the development would remain profitable for investors, according to additional analysis by WWF Norway.
Tessa Khan, executive director of Uplift said: “The Chancellor Jeremy Hunt has just said he wants energy firms to use their bumper profits to help ordinary people cope with the cost of living.
“He should start by telling Equinor to stop Rosebank and instead put far more of its billions into building cheaper, clean renewable energy. This is what the public want, not more oil for export.”
Read more: Analysis: Labour and Tories run from climate commitments as Europe burns
She added: “Instead this government seems determined to sell Britain short, while boosting the profits of obscenely wealthy foreign oil companies.
"Approving Rosebank will actually make Norway’s citizens richer as Equinor – which made £62 billion last year – is majority owned by the Norwegian government.
“To knowingly green light a project that delivers a loss to the Treasury, seems incompetent. To do so while watching the climate crisis worsen thanks to the continued burning of fossil fuels is even more baffling.
“When we know that Rosebank’s oil won’t lower energy bills for consumers one bit, at a time when millions in this country are living in fuel poverty, you’ve got to ask ‘who is this government batting for’?"
A UK Government spokesperson said: “These comments fail to recognise that the UK is a trailblazer in its ambitions to reach net zero by 2050 – forging ahead of many other countries and nearly halving emissions since 1990.
“Our world leading plans to power up Britain include large-scale investment in renewable and nuclear projects. But the transition to non-fossil forms of energy cannot happen overnight and even when we’re net zero, we still need some oil and gas – the industry also significantly boosts the Scottish economy estimated to support around 90,000 jobs.
“Through the energy profits levy we are ensuring excess profits – driven by Putin's illegal invasion of Ukraine - are being used to drive down people’s energy bills across the country.”
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