Released May 27, 2022 | GALWAY, IRELAND
en
Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The U.K. government is imposing a 25% windfall tax on the profits of oil and gas companies. The aim of the tax is to raise £5 billion (US$6.3 billion) over the next 12 months to support citizens struggling with soaring energy costs.
The move has been condemned by oil and gas representative body Offshore Energy U.K. (OEUK), which warned that it will deter investors and destabilize the industry in the short-term, "just when the global energy crisis makes stability vital." The new tax is on top of the 40% tax already paid on profits, for a total of 65% paid by U.K. oil and gas companies.
BP plc (NYSE:BP) (London, England) said it is reviewing the impact on up to £5 billion (US$6.3 billion) of its planned investments in the North Sea in light of the tax. "Today's announcement is not for a one-off tax -- it's 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."
Industrial Info is tracking more than 700 projects in the U.K. oil and gas sector worth in excess of US$26 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Project Database can click here for the full list.
The Energy Profits Levy was announced by U.K. Chancellor Rishi Sunak in light of record profits amid rocketing energy prices this year. He called it a "temporary measure" that will be phased out when oil and gas prices return to normal. In addition, he revealed a new Investment Allowance of 80% that would nearly double the tax relief available for firms on their investments.
"We know that people are facing challenges with the cost of living and that is why today I'm stepping in with further support to help with rising energy bills," Sunka said: "It is also right that those companies making extraordinary profits on the back of record global oil and gas prices contribute towards this. That is why I'm introducing a temporary Energy Profits Levy to help pay for this unprecedented support in a way that promotes investment."
Deirdre Michie, chief executive of OEUK, which represents 400 companies involved in the offshore oil, wind and gas sector, said: "This is an industry that thinks and plans long-term, meaning years and decades, so sudden new costs, like this proposed tax, will disrupt planning and investment and, above all undermine investor confidence. The reality is that we are already the U.K.'s most highly taxed industry. U.K. oil and gas operators pay 40% tax on their offshore profits. [A new tax] pushes up the cost of borrowing for new projects, making it more difficult to raise the money needed to maintain existing energy supplies and build the low carbon energy systems of the future."
She added: "The U.K. offshore industry needs a stable and predictable regime. A windfall tax may not affect projects already under way--but is likely to deter investments under consideration, for which funds have yet to be committed. The result would be a decline in oil and gas production in years ahead--just when the U.K. most needs reliable sources of energy."
In an unprecedented move, 31 large organizations that supply and service the oil and gas industry, including Wood Group (Aberdeen, U.K), Halliburton (NYSE:HAL) (Houston, Texas) and Worley Parsons Limited (North Sydney, Australia), wrote a joint letter to U.K. Prime Minister Boris Johnson, warning against the levy. It stated: "A one-off windfall tax on energy producers will not sustainably help consumers and will only further reduce investor confidence in the U.K., the ripple effect of which we will feel for many years to come. And it will do nothing to address the cyclical nature of an energy system linked to global supply and demand, with the U.K. becoming much less attractive to investors who will look elsewhere for the long-term stability they require to progress major energy projects."
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
The move has been condemned by oil and gas representative body Offshore Energy U.K. (OEUK), which warned that it will deter investors and destabilize the industry in the short-term, "just when the global energy crisis makes stability vital." The new tax is on top of the 40% tax already paid on profits, for a total of 65% paid by U.K. oil and gas companies.
BP plc (NYSE:BP) (London, England) said it is reviewing the impact on up to £5 billion (US$6.3 billion) of its planned investments in the North Sea in light of the tax. "Today's announcement is not for a one-off tax -- it's 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."
Industrial Info is tracking more than 700 projects in the U.K. oil and gas sector worth in excess of US$26 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Project Database can click here for the full list.
The Energy Profits Levy was announced by U.K. Chancellor Rishi Sunak in light of record profits amid rocketing energy prices this year. He called it a "temporary measure" that will be phased out when oil and gas prices return to normal. In addition, he revealed a new Investment Allowance of 80% that would nearly double the tax relief available for firms on their investments.
"We know that people are facing challenges with the cost of living and that is why today I'm stepping in with further support to help with rising energy bills," Sunka said: "It is also right that those companies making extraordinary profits on the back of record global oil and gas prices contribute towards this. That is why I'm introducing a temporary Energy Profits Levy to help pay for this unprecedented support in a way that promotes investment."
Deirdre Michie, chief executive of OEUK, which represents 400 companies involved in the offshore oil, wind and gas sector, said: "This is an industry that thinks and plans long-term, meaning years and decades, so sudden new costs, like this proposed tax, will disrupt planning and investment and, above all undermine investor confidence. The reality is that we are already the U.K.'s most highly taxed industry. U.K. oil and gas operators pay 40% tax on their offshore profits. [A new tax] pushes up the cost of borrowing for new projects, making it more difficult to raise the money needed to maintain existing energy supplies and build the low carbon energy systems of the future."
She added: "The U.K. offshore industry needs a stable and predictable regime. A windfall tax may not affect projects already under way--but is likely to deter investments under consideration, for which funds have yet to be committed. The result would be a decline in oil and gas production in years ahead--just when the U.K. most needs reliable sources of energy."
In an unprecedented move, 31 large organizations that supply and service the oil and gas industry, including Wood Group (Aberdeen, U.K), Halliburton (NYSE:HAL) (Houston, Texas) and Worley Parsons Limited (North Sydney, Australia), wrote a joint letter to U.K. Prime Minister Boris Johnson, warning against the levy. It stated: "A one-off windfall tax on energy producers will not sustainably help consumers and will only further reduce investor confidence in the U.K., the ripple effect of which we will feel for many years to come. And it will do nothing to address the cyclical nature of an energy system linked to global supply and demand, with the U.K. becoming much less attractive to investors who will look elsewhere for the long-term stability they require to progress major energy projects."
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
