Tax prompts BP to review North Sea oil investments

BP LAST night became the first major energy company to declare that it would review its investments in light of the Government’s new windfall tax, as it emerged that the levy could be imposed until 2026.

The FTSE 100 oil and gas producer said the tax was a “multi-year” proposal and it would have to “look at the impact” on its North Sea investment plans.

Bernard Looney, BP’S chief executive, had indicated that the firm’s plans to invest £18billion in the UK would not be affected by a raid on profits.

The measures were met with dismay in the sector, despite tax relief on investments. Offshore Energies UK, the trade group, said they were a “backward step” that would deter investment.

The Government bowed to months of pressure yesterday to act to help households facing soaring energy bills with a raid on the profits of producers benefiting from surging oil and gas prices.

Rishi Sunak, the Chancellor, introduced an Energy Profits Levy that takes the effective tax rate on North Sea oil and gas producers from 40 per cent to 65 per cent.

He said the measure, which took effect from yesterday, was expected to raise around £5billion in the first 12 months. The law allows the levy to be imposed until Dec 31 2025.

It comes after Ofgem, the energy regulator, warned this week that household

‘We will now need to look at the impact of both the new levy and the tax relief on our North Sea investment plans’

energy bills could hit £2,800 in October – having already climbed by 54 per cent in April.

The money will help the Government provide households with a new £21billion support package including a £400 energy bill rebate in October, double the amount previously announced and which no longer needs to be repaid.

However, critics raised concerns that the imposition of new taxes would deter investment in energy over the long term, harming jobs and energy security.

Derek Leith, global oil and gas tax leader at EY, cautioned that the move would be a “significant blow” to the UK oil and gas sector and risked harming jobs in the supply chain.

Shell, BP’S FTSE 100 rival, said it had “consistently emphasised the importance of a stable environment for longterm investment”, adding that this was “fundamental to our aim to invest between £20billion and £25billion in the UK in the next decade”.

Shell made £7billion in profit over the latest quarter, while BP made £5billion, with oil and gas prices high amid Russia’s war on Ukraine and the recovery in demand since the pandemic.

Mr Sunak said it was “right that those companies making extraordinary profits on the back of record global oil and gas prices” contribute towards the support for households.

BP said: “Today’s announcement is not for a one-off tax – it is a multi-year proposal. Naturally, we will now need to look at the impact of both the new levy and the tax relief on our North Sea investment plans.”