As another windfall tax looms large, North Sea oil companies have written to chancellor Jeremy Hunt to tell him that it could prove disastrous to their sector.
Hunt is planning an extension to the windfall tax during the upcoming Autumn Budget. This could well see another increase of five per cent, but the news has not gone down well with the Brindex trade group (Association of British Independent Exploration Companies).
That group comprises more than 20 companies including Harbour Energy, Ithaca Energy and NEO Energy, and they have told Hunt that an increase in the levy would hit the “appetite and financial ability” to invest. Brindex chairman Robin Allan said: “Yet another change to the tax regime, in just a matter of months, would be disastrous to this sector.
“The recently enacted UK Energy Profits Levy (EPL) and speculation about further fiscal changes have created huge uncertainty for independent oil and gas companies; our oil and gas projects are long term, with investment profiles often greater than 10 years. We need to be certain of the fiscal regime before we start to invest.”
The windfall tax – or Energy Profits Levy (EPL) – was brought in back in May, with a 25 per cent increase in the overall rate of tax to a total of 65 per cent. Government sources are reported as saying the UK faces a £50bn fiscal black hole which needs to be plugged in the upcoming budget on November 17.
“Our members are being unfairly treated by the EPL which hurts us disproportionately more than the supermajors,” added Allan. “Our members are not the supermajors who, with the help of their large trading operations, are reporting billions in worldwide profits, much of which is taxed outside the UK.”
In an interview with Sky News today, Business Secretary Grant Shapps suggested there could be a further raid on the “unexpected profits” of oil companies.
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