North Sea oil giant’s £2bn profit erased by windfall tax
THE North Sea’s biggest oil producer has warned it will be forced to cut staff and investment as it claimed its profits were all but wiped out by Rishi Sunak’s windfall tax.
Linda Cook, Harbour Energy’s chief executive, said the company was looking to grow the business outside of Britain where higher tax rates have “disproportionately impacted” Ukfocused drillers.
Harbour added it had cut its spending plans for Britain for the year, with some opportunities “delayed or no longer being progressed”.
The FTSE 250 company has been one of the biggest critics of the Prime Minister’s move to increase the tax rates on UK oil and gas companies, from 40pc to 65pc and then 75pc. The 75pc rate came into force on Jan 1. The increase was introduced in two stages last year to help households struggling with soaring energy bills because of higher wholesale oil and gas prices.
Producers warned it would lead to a drop in investment in the basin, harming Britain’s energy security.
Totalenergies, the French oil and gas giant, has said it will cut North Sea investment by £100m or a quarter this year because of the tax.
Harbour Energy made pre-tax profits of $2.5bn (£2.1bn) during 2022, more than 700pc higher than the previous year, as oil and gas prices leapt and its production increased.
However, it reported post-tax profits of only $8m once the impact of higher tax rates in Britain were taken into account.
It booked taxes of $2.4bn, made up of taxes for 2022 of $706m as well as a deferred expense of $1.7bn, $1.5bn of which relates to Britain’s so-called Energy Profits Levy.
Its bill for 2022 from the UK’S windfall tax was $326m, of which it has paid $205m, with the balance due this year.
The levy includes generous investment allowances, but Harbour had recently completed investment on its new Tolmount gas field.
Ms Cook said: “The UK Energy Profits Levy, which applies irrespective of actual or realised commodity prices, has disproportionately impacted the Uk-focused independent oil and gas companies that are critical for domestic energy security.
“For Harbour, the UK’S largest oil and gas producer, it has all but wiped out our profit for the year.”
Harbour, which employs about 1,500 people in Britain, first flagged staffing cuts in January. It has not given a figure, but said yesterday that they would be “significant”. Industry sources estimate that job losses could be in the hundreds.
The UK accounted for 97pc of Harbour’s production during the first nine months of last year, but it also has assets in Mexico and Indonesia. The company said it plans to invest 85pc of its $1.1bn capital spending this year in Britain, compared with 15pc internationally.
Producers are pushing Jeremy Hunt, the Chancellor, to introduce a floor on the windfall tax so that it falls away as prices fall.