By Scott Wright
NORTH Sea giant Harbour Energy has urged the UK Government to “carefully consider the consequences” of extending the levy on excess oil and gas industry profits, warning it could undermine the sector’s ability to invest in the area.
The UK Government is coming under intense pressure to increase the Energy Profits Levy following the hefty profits being made by oil and gas giants as commodity prices have soared in the wake of Russia’s war on Ukraine.
On Tuesday, BP reported third-quarter profits of $8.2 billion, which came after Shell made profits of $9.4bn for its third quarter the week before. The scale of the profits, which have sparked large payouts to shareholders, led to fresh calls this week for the Government to extend the windfall tax, as speculation mounts over the direction it will take when Chancellor Jeremy Hunt presents its budget on November 17.
In a trading and operations update yesterday, Harbour chief executive Linda Z Cook said speculation over the Government’s fiscal plans has “created uncertainty for independent oil and gas companies like Harbour.” And she warned it is leading to investors calling for investment to be made in other geographical areas.
Harbour, which operates huge North Sea assets such as the Greater Britannia Area and Catcher field, said it expects its total UK tax liability for 2022 to be $900 million. About $400m relates to the UK Energy Profits Levy, which was introduced by the UK Government in May.
The levy introduced a 25 per cent surcharge on the extraordinary profits oil and gas companies have made in light of the war in Ukraine. Ms Cook said: “Our company is proud to be the UK’s largest oil and gas producer and, through the combination of these activities, contributing meaningfully to domestic energy security while at the same time working to help realise a shared ambition of UK leadership in carbon dioxide capture and storage.
“However, the recently enacted UK Energy Profits Levy (EPL) and speculation about further fiscal changes have created uncertainty for independent oil and gas companies like Harbour. As a result, evaluating expected returns from long-term investments has become more difficult and investors are advocating for geographic diversification.
"While we fully recognise the significant challenge in the UK to put public finances on a sustainable footing, we urge the Government to carefully consider the consequences of any increase in or extension of the EPL.
“At a time when oil and gas producers are being asked to invest more to help ensure the UK’s energy security and are considering longer term, material investments in CCS (carbon capture and storage), additional taxes would run the risk of undermining our ability to do either.”
Ms Cook’s comments came as Harbour raised production guidance for the full year after a 27% rise to 207,000 barrels of oil equivalent per day in the first nine months of year. Unit operating costs were down by 18% on the same period last year at $14 per barrel of oil.
The company said it has returned around $500m to shareholders so far this year between dividends and share buybacks.
Harbour was formed through the merger of North Sea heavyweights Premier Oil and Chrysaor last year.
Shares closed up 11.8p at 396.31p.
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