Windfall tax blamed for hundreds of job cuts at North Sea driller

BRITAIN’S largest North Sea producer has blamed the new windfall tax as it prepares to cut hundreds of jobs and shift attention to outside the UK.

Harbour Energy said it is reviewing its UK organisation “to align with lower future activity levels” after the tax rate on North Sea drillers was increased from 40pc to 75pc following months of soaring gas and oil prices.

The FTSE 250 company told staff about the planned job cuts yesterday.

It has not revealed how many jobs will be lost. Industry sources believe it is in the hundreds. It employs about 1,500 in the UK. The move is likely to ring alarm bells in Whitehall, which has been trying to boost North Sea oil and gas production even as it raids producers’ profits to try and help households facing record energy bills.

Harbour’s profits climbed from $120m (£97m) in the first half of 2021 to $1.5bn in the first half of 2022, thanks to higher energy prices and higher production. Drillers across the industry have been reporting record profits after Russia’s invasion of Ukraine triggered market disruption and worsened shortages, pushing up prices.

Harbour made revenue of $4.1bn during the nine months to September 2022. It has said it expects to pay an extra $400m in 2022 UK taxes because of the higher rate, taking its total UK tax bill for the year to $900m.

It is the first company to blame job cuts on the windfall tax, although others have warned it could curb investment.

Totalenergies, the French oil and gas giant, has said it will cut North Sea investment by £100m or 25pc this year owing to the tax.

The tax rate was raised to 75pc in two stages, in May and November, and includes investment allowances. But Harbour Energy had invested heavily in a new Tolmount gas field in the southern North Sea which started producing just as the windfall tax came into effect.

Linda Cook, chief executive of Harbour Energy, has been a staunch opponent of the extra tax.

She urged the Government to “carefully consider” the consequences as it prepared the November increase. Mike Tholen, sustainability director at Offshore Energies UK, the trade group, said the Government needed to “rebuild confidence” among industry.

He said: “These tax increases, and the threat of more to come, have made the UK a much riskier place to invest and so makes it far more likely that investors will look overseas instead.”

Harbour Energy became the UK’S largest producer after buying up oil and gas wells from Shell and Conocophillips in 2017 and 2019. It joined the London stock exchange after taking over Premier Oil in 2021. It is currently focused on the UK, which accounted for 97pc of its production during the first nine months of 2022. It also has assets in Mexico and Indonesia.

Harbour Energy said: “Following changes to the EPL [energy profits levy], we have had to reassess our future activity levels in the UK. “

A Treasury spokesman said: “The EPL strikes a balance between funding cost of living support while encouraging investment in order to bolster the UK’S energy security.

“We have been clear that we want to encourage reinvestment of the sector’s profits to support the economy, jobs, and our energy security, which is why the more investment a firm makes into the UK, the less tax they will pay.”