The North Sea's largest oil and gas producer is preparing to cut hundreds of jobs and shift attention outside of the UK in response to the windfall tax.
Harbour Energy confirmed last night that it had launched a review of its UK business "to align with lower future activity levels" after the tax rate on operators was increased from 40% to 75% following months of soaring gas and oil prices.
And in a trading update released to the London Stock Exchange this morning, the firm also confirmed that it has not taken part in the UK Government's 33rd offshore licensing round.
The FTSE 250 company told staff of the planned job cuts on Wednesday. It has not revealed how many jobs will be lost, but industry sources told The Telegraph they believe the number to be "in the hundreds".
Investment harmed
The Energy Profits Levy - introduced by Rishi Sunak when he was chancellor and then extended by current incumbent Jeremy Hunt - was introduced despite clear warnings from energy sector bosses that it would harm investment, jobs, energy security and energy transition.
Harbour is the first company to blame job cuts on the windfall tax, although others have warned it could curb investment. TotalEnergies, the French oil and gas giant, has said it will cut North Sea investment by £100million or 25% this year owing to the tax.
Addressing investors this morning, Harbour Chief Executive Linda Cook said: "We remain committed to playing an important role in the continued supply of reliable and responsible domestic oil and gas in the UK.
"However, while oil and gas prices have reverted to more normal levels we still face a tax rate of 75% in the UK due to the recent tax changes, making investment in the country less competitive. As a result, the EPL necessitated a review of our future activity levels in the UK and reinforced our ambition to grow and diversify internationally."
Today's update showed that the UK windfall tax alone has cost the company $350million (£284million) since May, and that its overall tax payments for 2022 more than doubled to $600million (£487million).
It also shows the firm spent $300million (£243million) less than expected on projects in 2022 due, in part, to decisions "not to proceed with several North Sea exploration and appraisal wells".
Reaction
Mike Tholen, sustainability director at Offshore Energies UK, the trade group, said the government needed to “rebuild confidence” among industry.
He said: “These tax increases, and the threat of more to come, have made the UK a much riskier place to invest and so makes it far more likely that investors will look overseas instead.”
Russell Borthwick, Chief Executive at Aberdeen & Grampian Chamber of Commerce, said: "This is what happens when politicians put populism before pragmatism.
"The Chamber has been warning since last Spring that a windfall tax on the UK energy sector would lead to disinvestment and job losses. Increasingly this is coming home to roost.
"Less than a year ago, it would have been unconceivable to think that Harbour Energy had chosen not to bid in the latest licencing round and are consulting with staff about ‘significant’ redundancies. But today, this is the situation.
"The blame for these job losses lies firmly at the door of Rishi Sunak (architect of EPL) and Jeremy Hunt (who removed the price floor). They ignored industry warnings. Now people in our region are paying with their livelihoods and the prospect of domestic energy security and the UK becoming a leading player in renewable energy is disappearing over the horizon. Others are in the game.
"The Treasury is now banking £2.1billion per month in tax revenues from companies operating in the North Sea, yet oil prices have pretty much returned to where they were before the Ukraine conflict.
"And it’s not only traditional oil & gas operators that are being impacted. The Chief Executive of SSE was recently that they ‘may have to give up’ on some green energy projects as a direct result of windfall tax. Wow.
"This cannot be allowed to continue and we urge the Prime Minister and his Chancellor to visit Aberdeen as a matter of urgency to hear from businesses about the impact their energy and taxation policies are having on the ground and the changes in approach that are urgently required."
A Treasury spokesman said: “The Energy Profits Levy strikes a balance between funding cost of living support while encouraging investment in order to bolster the UK’s energy security.
“We have been clear that we want to encourage reinvestment of the sector’s profits to support the economy, jobs, and our energy security, which is why the more investment a firm makes into the UK, the less tax they will pay.”