2024-05-11 08:44:38
Independent oil companies operating on the British North Sea shelf are in crisis, despite rising prices for their products. As top managers and analysts working in the oil and gas industry told the Financial Times (FT), the tax policy of the UK government led to such consequences, Day.Az reports with reference to TASS.
London’s 35% windfall tax, which London imposed on the oil and gas industry in May 2022, now forces oil and gas companies to pay up to 75% of their profits to the government. The new tax was adopted to replenish the budget against the backdrop of a sharp rise in energy prices, as well as record profits received by BP and Shell after the start of a special Russian military operation in Ukraine, and will remain in place until 2029. As the article notes, this was a huge blow for small companies, which now primarily produce on the British shelf, from where the industry giants have been gradually leaving for years. Independent oil and gas producers say they have not benefited as much from rising prices as the larger players, whose businesses are much more diversified.
“Many producers have left or are leaving the UK. Production volumes and the number of jobs are constantly declining, which is bad from a macroeconomic point of view,” EnQuest chief executive Amjad Bseisu told the publication.
As the FT points out, the share price of independent oil and gas companies whose activities are concentrated in the UK is falling despite the fact that the MSCI global energy index has grown by 30% over the past two years. Shares in Serica Energy fell 37% during that time, while Britain’s largest independent oil and gas producer Harbor Energy fell 23%. UK offshore oil and gas production in 2023 also fell to its lowest level since 1977, at just 1.2 million barrels of oil equivalent. Over the past 10 years, the number of jobs created by the industry has decreased from 500 thousand to 200 thousand, and by the end of 2030 this figure may decrease by another 40 thousand.
FT notes that the situation in the industry may become even more difficult after Labor comes to power in the country, which, according to all forecasts, will defeat the Conservative Party, which has been ruling since 2014, in the upcoming parliamentary elections before the end of the year. Its program involves increasing the tax burden of oil and gas companies to 78%, as well as the abolition of tax breaks for the development of new fields.