Protests from the UK’s oil and gas industry were ignored by the government on its “green day”, as it left its 35% windfall tax on North Sea firms untouched.
Citigroup analysts had been among those expecting the government to introduce a floor to the levy, which took the total tax on North Sea producers’ profits to 75% from last May.
According to a survey by industry body Offshore Energies UK, 95% of respondents said they were looking to invest elsewhere due to the tax, with today’s lack of reform unlikely to help the government’s case.
Shell PLC (LSE:SHEL, NYSE:SHEL) and Harbour Energy PLC (LSE:HBR), the North Sea’s largest independent firm, are among those having already threatened to shift investment overseas, while TotalEnergies said it would cut UK spending by 25% in response to the tax.
North Sea firms are able to gain a 91% tax break by reinvesting earnings, though this has not been enough to prevent a backlash, with Harbour complaining in March its profits were "wiped out" due to the levy - though it still managed to afford US$1bn of shareholder returns.
Centrica PLC (LSE:CNA), which owns British Gas, had been in line to benefit from a floor on the tax, Citi said.
Instead, the government said it would “engage with industry, consumer groups and other stakeholders” to discuss future investment in gas, which accounts for around 40% of the UK’s energy.
Oil and gas remain “critical” but were dubbed as “transition fuels” by the government, which left the door open to supply coming from both domestic sources and imports in the future, and put support behind carbon capture as a way of cleaning up the industry.