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Released December 14, 2022 | GALWAY, IRELAND
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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--There has been a backlash from major oil and gas companies to the U.K.'s increase in the windfall tax that threatens future investment in North Sea projects.
French company TotalEnergies SE (NYSE:TTE) (Courbevoie, France) has said that it will cut its planned investment by £100 million (US$105 million)--around 25% of its planned spending--after the government recently bumped up the tax burden on oil and gas company profits from 25% to 35%. The Energy Profits Levy (EPL) will also now stay in place until 2028 as opposed to 2025 as originally announced. It brings the total tax burden on oil and gas firms to 75%.
"For 2023 alone, our investments will be cut by 25%," U.K. Country Chairman Jean-Luc Guiziou wrote in a statement to Energy Voice. "Following another change to the fiscal environment for energy investors in the U.K., we are now evaluating the impact of this change on our current and planned projects. We note that without a price floor to the EPL, the current regime will affect short-cycle investments, in particular infill wells."
He explained that a competitive and stable fiscal and regulatory regime is "vital to investment in critical energy and infrastructure projects" that are key to the U.K.'s energy security and its ambitious net zero goals. "The energy industry operates in a cyclical market and is subject to volatile commodity prices. We believe that the Government should remain open to reviewing the energy profits levy if prices reduce before 2028."
Fellow oil and gas majors Equinor (NYSE:EQNR) (Stavanger, Norway) and Shell plc (NYSE:SHEL) (London, England) released statements warning that they are separately re-evaluating their U.K. investment plans.
"Uncertainty makes it harder to take investment decisions, especially the uncertainty around the longevity of the EPL," Equinor stated to the media. "The Autumn Statement did not help investor confidence and we are evaluating the impact of the EPL on our projects." Industrial Info is tracking the company's planned Rosebank project, one of the largest untapped oil and gas projects in the North Sea. It is estimated to contain up to 300 million barrels of recoverable oil, according to industry estimates. Planned commissioning is 2026 through to 2030, and it has the potential to account for 8% of the U.K.'s oil production.
Industrial Info is also tracking Shell's Jackdaw field development, located approximately 275 kilometers east of Aberdeen in the central North Sea. It estimates that the field has reserves of between 120 million and 250 million barrels of oil equivalent. At its peak, Jackdaw is expected to produce 6.5% of the U.K's total gas needs. "We're going to have to evaluate each project on a case-by-case basis," said Shell's U.K. Country Chairman David Bunch at the Confederation of British Industry's annual conference in Birmingham. "When you tax more, you're going to have less disposable income in your pocket, less to invest." Shell's planned U.K. investment in energy projects amounts to £25 billion (US$30.5 billion).
The Association of British Independent Exploration Companies (Brindex) warned of a complete collapse of North Sea business for independent producers. Jacques Tohme, a spokesman for Brindex, told GB News: "We're talking about what is a Treasury-inflicted complete collapse of the North Sea. The timing of this is very important, given how strategic the North Sea is right now in the face of war with Russia and runaway inflation. This Finance Bill will increase energy costs to consumers. It will actually lower revenues over time for the Treasury because they are on a hook for £20 billion (US$24.4 billion) of decommissioning and that will accelerate as fields get decommissioned earlier. We will have to leave the country and with that a lot of jobs, infrastructure, and most importantly energy security and bills will suffer."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
French company TotalEnergies SE (NYSE:TTE) (Courbevoie, France) has said that it will cut its planned investment by £100 million (US$105 million)--around 25% of its planned spending--after the government recently bumped up the tax burden on oil and gas company profits from 25% to 35%. The Energy Profits Levy (EPL) will also now stay in place until 2028 as opposed to 2025 as originally announced. It brings the total tax burden on oil and gas firms to 75%.
"For 2023 alone, our investments will be cut by 25%," U.K. Country Chairman Jean-Luc Guiziou wrote in a statement to Energy Voice. "Following another change to the fiscal environment for energy investors in the U.K., we are now evaluating the impact of this change on our current and planned projects. We note that without a price floor to the EPL, the current regime will affect short-cycle investments, in particular infill wells."
He explained that a competitive and stable fiscal and regulatory regime is "vital to investment in critical energy and infrastructure projects" that are key to the U.K.'s energy security and its ambitious net zero goals. "The energy industry operates in a cyclical market and is subject to volatile commodity prices. We believe that the Government should remain open to reviewing the energy profits levy if prices reduce before 2028."
Fellow oil and gas majors Equinor (NYSE:EQNR) (Stavanger, Norway) and Shell plc (NYSE:SHEL) (London, England) released statements warning that they are separately re-evaluating their U.K. investment plans.
"Uncertainty makes it harder to take investment decisions, especially the uncertainty around the longevity of the EPL," Equinor stated to the media. "The Autumn Statement did not help investor confidence and we are evaluating the impact of the EPL on our projects." Industrial Info is tracking the company's planned Rosebank project, one of the largest untapped oil and gas projects in the North Sea. It is estimated to contain up to 300 million barrels of recoverable oil, according to industry estimates. Planned commissioning is 2026 through to 2030, and it has the potential to account for 8% of the U.K.'s oil production.
Industrial Info is also tracking Shell's Jackdaw field development, located approximately 275 kilometers east of Aberdeen in the central North Sea. It estimates that the field has reserves of between 120 million and 250 million barrels of oil equivalent. At its peak, Jackdaw is expected to produce 6.5% of the U.K's total gas needs. "We're going to have to evaluate each project on a case-by-case basis," said Shell's U.K. Country Chairman David Bunch at the Confederation of British Industry's annual conference in Birmingham. "When you tax more, you're going to have less disposable income in your pocket, less to invest." Shell's planned U.K. investment in energy projects amounts to £25 billion (US$30.5 billion).
The Association of British Independent Exploration Companies (Brindex) warned of a complete collapse of North Sea business for independent producers. Jacques Tohme, a spokesman for Brindex, told GB News: "We're talking about what is a Treasury-inflicted complete collapse of the North Sea. The timing of this is very important, given how strategic the North Sea is right now in the face of war with Russia and runaway inflation. This Finance Bill will increase energy costs to consumers. It will actually lower revenues over time for the Treasury because they are on a hook for £20 billion (US$24.4 billion) of decommissioning and that will accelerate as fields get decommissioned earlier. We will have to leave the country and with that a lot of jobs, infrastructure, and most importantly energy security and bills will suffer."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
