UK urges windfall tax on offshore oil and gas operators

Just weeks after the BP boss said high commodity prices had turned his company into a “cash machine”, pressure on Chancellor Rishi Sunak to impose a one-off windfall profits tax on Britain’s offshore oil and gas operators is mounting.

Labour, Liberal Democrats and some Conservative MPs want Sunak to levy a tax on North Sea operators’ profits to ease soaring domestic energy bills, arguing the industry can easily take the hit.

Shadow chancellor Rachel Reeves says the windfall will partly fund a Labour plan to cut energy costs for all consumers by around £200 this year and provide more than 9 million poor households £400 off your bill.

The industry claims a one-off windfall profits tax on UK offshore oil and gas operators would cause “irreparable damage” to the industry and make consumers more vulnerable to global shortages.

But politicians in Westminster are eyeing operators as a potential source of funding to ease the cost of living crisis, especially as industry leaders say their companies are flush with cash.

November, Bernard RooneyBP’s chief executive said a surge in global commodity prices as quarterly profits surged had turned his company into a “cash machine” as it backed a share buyback program.

“When the market is strong, oil prices are strong and gas prices are strong, this is effectively a cash machine,” he told the Financial Times.

Meanwhile, Serica Energy, the North Sea company responsible for 5% of UK gas production, said in September that it expected to “very significant return“For shareholders, it’s thanks to record high prices.

Still, offshore industry body BP, claims companies will be increasingly reluctant to make long-term investments if they are threatened with windfall taxes when prices rise.

Mike Tholen, OGUK’s director of sustainability, said a windfall tax was “not in anyone’s interest” and the Treasury had seen “significantly higher returns” from North Sea energy companies.

“Over the next two years, the Treasury expects the industry to increase tax revenues by £3bn – with direct taxation expected to be close to £5bn. The upstream oil and gas industry pays almost twice as much corporate tax as the rest of the industry, “Tholen said.

By imposing more taxes on companies, the government could also hinder investment in the UK’s green energy infrastructure, he added.

North Sea operators benefit from one of these despite energy companies paying taxes in the UK favorable tax system compared to other oil and gas producing regions in the world.

Under Labour’s plan, North Sea energy producers would be forced to pay £1.2bn to ease household spending by raising corporate tax by 10 percentage points.

Labour will also remove VAT on fuel bills as part of controlling energy prices; the cap on household bills is expected to rise to almost £2,000 in April from £1,277 for the average household, driven by high wholesale gas prices.

Liberal Democrat leader Sir Ed David, who also supports windfall profits tax, said: “It’s not right that some energy fat cats are profiting from record petrol prices while millions can’t even afford their heating. ” Former Conservative energy minister Chris Skidmore also backs the idea.

Sunak will hold a mini-budget in March, but the finance ministry has been wary of the one-off tax in the past, which could have the effect of significantly reducing investment and supply in the year of implementation, putting further upward pressure on prices.

Government circles are concerned that the maritime windfall tax would also largely hit oil, rather than gas, producers, pushing up fuel prices. But Sunak also said he was considering a range of options to help people pay for domestic energy bills.

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