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North Sea oil and gas producers urged Britains incoming Prime Minister Keir Starmer to provide clarity on his election promise to increase tax on the sector, warning it could lead to a rapid decline in output and revenue.
Starmers Labour Party swept to power in a parliamentary election on Thursday, ending 14 years of Conservative government.
The partys manifesto promised to rapidly build up Britains renewable power, partly by increasing taxes on its oil and gas sector. It also vowed to end issuing new licences in the North Sea basin.
David Whitehouse, Chief Executive of industry body Offshore Energies UK, said the sector and investors were deeply concerned over Labours plans.
"These policies, if poorly managed, and without industry input, will threaten jobs and undermine the decarbonisation of the UK economy. The details matter," Whitehouse said in a statement.
Labour said it will increase by 3 percentage points a windfall tax on energy producers first imposed in 2022 after energy prices spiked following Russias invasion of Ukraine.
The current 35% windfall tax, which will run until 2029, brings the total tax burden on producers to 75%, among the highest in the world.
Labour also vowed to scrap the so-called investment allowance, which exempts most profits that are re-invested in oil and gas production, but provided little detail.
David Latin, Chairman of producer Serica Energy, said that without clarity, investments and taxes from the sector would drop rapidly.
"Theres this misunderstanding which is that somehow were a golden goose and well just keep laying eggs. But if you dont feed the goose with investment dollars, itll keel over and therell be no more eggs," Latin told Reuters.
The windfall levy wiped out most profits for producers last year and many, including Harbour Energy, the basins largest producer, pared back investments and cut hundreds of jobs. Many of the producers are now looking to acquire assets beyond the North Sea.
Gilad Myerson, former executive chairman of Ithaca Energy, said Labour must choose between producing oil and gas locally or importing fuel.
"The policies that Labour have suggested in their Manifesto will simply decimate the local industry and local production," Myerson told Reuters.
"My only hope is that now they are in power they will revisit their energy policies and focus on making economically correct decisions." |
