North Sea windfall tax causing ‘irreversible damage’ says oil giant
The boss of Enquest has slammed the windfall tax on oil and gas firms as doing “irreversible damage” to the industry and “driving job losses across the sector”.
Amjad Bseisu, Enquest’s chief executive, called for the North Sea tax to be scrapped in an operations update on Tuesday after claiming it makes the UK a less attractive place to invest.
The UK Energy Profits Levy (EPL) was introduced in May 2022 and applies to oil and gas companies operating in the North Sea.
It is designed to tax the extra profits these companies made due to surging energy prices after Russia’s invasion of Ukraine.
Initially, the rate was 25 per cent, but it later jumped to 35 per cent in January 2023.
The tax has been extended by Chancellor Rachel Reeves to run until March 2030, but has a “price floor” mechanism, which allows it to end early if prices fall significantly.
London-listed company Harbour Energy slammed the government’s “punitive fiscal position” earlier this month as it axed 250 jobs in Aberdeen.
Bseisu argued: “The recent stepdown in commodity prices has further amplified calls for the UK government to remove the Energy Profits Levy and return the North Sea to a position of global competitiveness.”
Commodity prices set to tumble
The World Bank last month forecasted that weakening global growth amidst geopolitical turmoil was set to push commodity prices down 12 per cent in 2025, followed by another five per cent in 2026.
This would mark the lowest levels of the 2020s and bring an end to the price boom fuelled by the COVID-19 pandemic recovery and the Russia and Ukraine war.
Bseisu said the UK was “the only country levying a windfall tax on homegrown energy producers, where no windfall profits exist.”
As a result of the heavy tax burden, the FTSE 250 firm has laid out a “disciplined approach” to investment plans for the next 18 months.
The company plans to pay nearly $100m (£73.7m) in windfall tax in June 2025, which would mean most tax payments for the year will be made in the first half. As a result, the firm expects cash outflows to to be lower in the final six months of the year.
Enquest expects operating expenses to top $450m in 2025 but remains committed to “ongoing” cost reductions.
Bseisu said: “We remain focused on delivering a material UK transaction in the short term, and we are resolute in our belief that our relative advantages, both operational and fiscal, see us ideally placed as a North Sea consolidator.”