A slump in the price of Brent crude has prompted North Sea oil producers to call for a floor to be established to offset the impact of the recent UK windfall tax.
Brent crude was today at a year’s low of below US$80 a barrel, sending share prices of top North Sea producers Harbour Energy down 2.9%, BP by 2% and Shell also by 2%.
The UK government introduced the Energy Profits Levy (EPL) on the North Sea producers earlier this year after criticism that they were making huge profits due to the surge in crude prices sparked by the Ukraine war.
Chancellor Jeremy Hunt increased the levy from 25% to 35%, taking the marginal tax rate on North Sea profits to 75%, in his Budget in last month.
That prompted Shell to call for a price floor for the windfall tax, something that has now been taken up by other North Sea-focused oil and gas groups.
Jacques Tohme, director and founder of Tailwind, a North Sea producer, told Reuters: "We're happy to pay higher tax, but we need a floor of $75 to $100 a barrel above which a true windfall tax can be applied."
Small and mid-cap producers meanwhile are claiming that their access to funding is being affected by the windfall levy.
Banks are cutting their credit facilities by around 40% as a result of the tax changes, said the report, which going forward affects the criteria for reserve-based lending, a key tool for funding future developments.
Oil and gas producers are reportedly to meet representatives of the Treasury and Department for Business on Friday to discuss the EPL.
Critics of the windfall levy also include climate campaigners, who claim the tax breaks introduced alongside the EPL encourage more fossil fuel development.
New fields effectively get a full tax write-off due to the 91p in the pound relief announced when the windfall tax was first brought in.
That relief has prompted developers of offshore renewable assets to demand similar tax breaks.