UK Chancellor Rishi Sunak told oil and gas executives in Aberdeen yesterday that he wants to ensure investment in the sector continues despite the windfall tax, the Guardian reported.
The Chancellor announced last month that he would introduce a new charge on oil and gas profits to help pay to reduce consumer bills while also reducing tax for companies that invest in projects in UK waters.
His comments highlight the duality of the government’s policy on the oil and sector, as shown by the decision to place a tax on oil and gas profits while also introducing a ‘super deduction’ tax rebate for producers that develop projects in UK soil.
The government introduced the new so-called tax, or levy, on energy profits as part of a £5bn package of care designed to tackle the cost-of-living crisis.
In the Scottish meeting with oil and gas producers yesterday, which took place at the Net Zero Technology Centre, Sunak insisted on continued investment in the sector and implored banks to provide capital for new projects.
The latest pledge comes amid warnings from oil companies such as BP PLC (LSE:BP.), which won seabed rights this January to develop an offshore wind farm off the Scottish coast, that a windfall tax would indirectly impact their greener efforts.
Lobbyists in the oil and gas industry are pushing for the tax to end sooner, for the levy investment allowance to be backdated, and for decommissioning costs to be included within the allowance.
Harbour Energy PLC (LSE:HBR) chief executive Linda Cook reportedly wrote to the Chancellor warning that the windfall tax would lead to lower investment in the UK, not more.
Sunak, who initially opposed the proposal put forward for the windfall tax by Lib Dem leader and former coalition energy secretary Ed Davey in May, is expected to operate the tax until normal market conditions resume, or until the end of 2025.