Chancellor Rishi Sunak is expected in Aberdeen today for talks with North Sea oil and gas producers over his controversial windfall tax.

He is due to meet industry executives in the city after they hit out at his proposed 25% levy on their profits to partly fund a £15billion package of Government support for households struggling with rising energy bills.

The new tax is expected to raise £5billion in its first year to fund support for families whose energy bills could rise to more than £3,000 a year on average in January, according to estimates by the consultancy Cornwall Insight.

Invitations have been sent to executives at offshore oil and gas operators to meet a "senior Treasury official" in Aberdeen, and companies were told Mr Sunak is due to make the journey.

The Financial Times states that one source familiar with the plans for today's visit said Mr Sunak is expected to try to smooth relations with the industry, as well as hold a question-and-answer session on the details of his proposed levy.

Topics high on the agenda are said to be a firm date for the end of the extra tax, decommissioning rebates, and investment incentives for carbon capture and storage technology.

The FT also reports that the Government has signalled it is cooling on proposals to extend the levy to electricity generators.

When Mr Sunak announced his cash raid on oil and gas producers in May he said he would consult on extending it to electricity generators - such as EDF Energy, RWE and SSE - after they produced what he described as "extraordinary profit" from high wholesale power prices.

Electricity generators to avoid new levy

But Government officials have indicated privately to companies that the tax is now increasingly unlikely to apply to electricity generators.

A source said: "The direction of travel is away from a windfall tax on generators because the sector is just too complex and it could clobber investment...it turns out it's just too complex to work out who has made how much excess profit."

Although Labour had been pushing for a windfall tax on North Sea oil and gas producers for months, the details of Mr Sunak's levy took the offshore industry by surprise when they were unveiled.

The sector had been expecting a one-off hit, but the extra tax will remain in place until the end of 2025 unless oil prices fall back substantially. This could lead to a £17.5billion drain on the profits of North Sea operators between now and then.

The FT says Mr Sunak's new levy also circumvents existing incentives, meaning companies that had expected to use losses incurred during previous years to avoid a tax bill in 2022 will now find themselves subject to the 25% extra tax.

Although the Chancellor included in the additional tax a new investment allowance designed to incentivise producers to press ahead with new projects, the industry has warned the windfall tax is already triggering a rethink of some proposed developments in UK waters.

These would be vital to achieving the Government's goal of maximising domestic oil and gas production following Russia's invasion of Ukraine.

Oil and gas operators have been lobbying for a number of changes to the levy, including allowing producers to use investments made during the coronavirus pandemic to offset their tax bills.

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