Harbour Energy warns the Government over the consequences of another windfall tax

The North Sea’s largest oil and gas producer has warned the government to “think carefully about the consequences” of another windfall for the sector.

Harbor Energy said the policy threatened to undermine investments that would increase the UK’s energy security and help it achieve net-zero targets.

Prime Minister Rishi Sunak and Jeremy Hunt, the Chancellor, plan to increase the size of the windfall tax to raise a cumulative £40bn over five years.

Harbor chief Linda Cook said uncertainty over the so-called energy pricing levy (EPL) pressured lenders to look for projects elsewhere in the world.

“While we fully recognize the major challenge in the UK in putting public finances on a sustainable basis, we urge the government to carefully consider the implications of any increase in our EPL renewal,” Cook said.

The company is already facing a £800m tax bill in the UK this year, including £360m as a result of the additional 25 per cent levy on North Sea oil and gas profits announced in May.

Sunak and Hunt want to raise the rate to 30 percent and push the tax end date from 2025 to 2028 as they try to fill a gap of more than £50 billion in public finances.

But due to the planned increase, the total tax rate for companies in the North Sea will go from 65 percent to 70 percent.

Threat: Harbor Energy boss Linda Cook

The standard UK corporate tax rate is 19 per cent, which is well below the rate faced by oil and gas exploration companies, although this will rise to 25 per cent in April.

Cook said the current windfall tax on the North Sea and speculation of a further incursion “has created uncertainty for independent oil and gas companies such as Harbour.”

“As a result, evaluating expected returns from long-term investments has become more difficult and investors are advocating for geographic diversification,” she added.

Cook said it came at a time when energy producers were being asked to invest more to increase energy security in the UK and to keep an eye on carbon capture and storage projects that could play a key role in achieving net -zero.

“Additional taxes would risk undermining our ability to do either,” the 64-year-old said.

The comments came as part of a trade update in which Harbor reported revenue of £3.7 billion for the first nine months of the year.

Harbor Energy was formed last year from a merger between Premier Oil and Chrysaor. The industry has become an easy target for politicians who have seen profits soar as energy prices soared as the Covid lockdowns ended and Russia invaded Ukraine. Port shares gained 4.8 percent, or 18.4p, to 402.9p.