Saturday, June 25, 2022

Oil giant ‘threatens to drop £4.5bn North Sea deal over windfall tax’

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A Norway-based company is reportedly threatening to withdraw funding for a new £4.5 billion oil exploration project off the coast of Scotland to protest the UK government’s windfall tax on energy company profits.

Norwegian state-owned energy company Equinor has privately told its industry contacts that it is reconsidering its plan to drill for oil and gas in the North Sea in the Rosebank field near Shetland The Telegraph.

Equinor said that before it embarks on the project it wants the government to change the terms of its energy profits levy – which was imposed to raise funds to help households with sky-high gas and electricity bills amid a livelihood crisis fueled in part by the Russian invasion of Ukraine.

Chancellor Rishi Sunak said about £5bn would be raised by the additional one-off levy of 25 per cent on the “extraordinary” gains energy companies have made since May 26 this year.

The levy has been reported to have caused friction in the Cabinet. Business Secretary Kwasi Kwarteng is understood to have written to Mr Sunak last week to warn that the levy – and the sector’s lack of consultation – risked losing investment in the North Sea project.

Shortly after the announcement of the windfall tax, a senior Equinor executive had warned that the Rosebank project was in jeopardy, an industry source said telegraph.

According to the newspaper, Equinor had also postponed its decision on the project until 2023.

The source reportedly said: “The biggest issue up for debate right now is the Rosebank project. Especially Rosebank is definitely available. Equinor has privately said it’s under review, but they haven’t done so publicly.

“Rosebank is a big project, but for Equinor, honestly, it has bigger projects elsewhere. It would be pretty relaxed to say we don’t want to do this project.”

A spokesman for Equinor said: “Equinor welcomes the North Sea Transition Authority’s decision to extend the license for the Rosebank development project. We will continue to work with our partners and stakeholders to ensure we make progress and deliver on the Rosebank project to strengthen UK energy security.”

Energy companies are pushing for changes to windfall tax by industry body Offshore Energies UK.

The trade body wrote to Mr Sunak last week to call for six urgent amendments, a “clear end date” for the levy and an urgent meeting with Downing Street.

Meanwhile, Shell has separately told analysts it’s also less likely to develop the £2bn Cambo project in the North Sea following the introduction of the windfall tax.

Earlier this month, Sinead Gorman, Shell’s chief financial officer, told analysts at RBC Capital Markets that progress in the Cambo field was less likely after the 25 percent additional levy.

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