Serica Energy chairman Tony Craven Walker has warned UK North Sea taxation is “likely to become unsustainable”, with gas prices having dropped.
The windfall tax, introduced last May and raised in November, means the offshore energy industry is now levied at a headline rate of 75% on profits.
Meanwhile, gas prices are now around 80% lower than they were last August, Mr Craven Walker said.
Smaller North Sea firms worse hit
He added: “The (UK) government has raised taxes on the offshore industry to a level which does not reflect current prices or provide for a price floor level.
“This has impacted the smaller companies disproportionately far more than the international companies and is likely to become unsustainable, given that prices are now very materially below the levels envisaged when the tax rises were introduced.”
It has “had a material effect on the share prices of companies such as Serica”, he said, adding it also “puts a question mark over the financing of many North Sea projects”.
Banks like BNP Paribas have said they will reduce finance for oil and gas firms, while reserves-based lending has dropped significantly across the board due to the levy.
Mr Craven Walker will step down from his chairman’s role at London-listed Serica’s annual general meeting next month.
He delivered his warning in the company’s annual report, published this week.
Smaller North Sea players are focused on maximising production for the “ultimate benefit of the UK at a time when the provision of energy security has never been more important”, he said.
But this needs a “stable fiscal environment in which we can plan and operate with taxes at a level commensurate with the risks that we take,” he added.
‘It is to be hoped the government will review its current policy’
He continued: “Setting taxes on profits at the current 75% level without any provision for falling prices drives away the financing which is required.
“It is to be hoped the government will review its current policy.”
Mr Craven Walker said smaller North Sea firms like Serica needed to be able to thrive and show the innovation required to “bring the full benefit of offshore resources to the UK, in parallel with the energy transition efforts being made by the major companies”.
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