A North Sea oil and gas boss is today warning Chancellor Jeremy Hunt that any fresh changes to taxation of the sector will send a clear message to global energy investors about whether the UK is the right place to put their money.
Sam Laidlaw, executive chairman of Neptune Energy, stresses that a stable and predictable tax regime is the foundation for investor confidence.
He is the latest industry figure to voice concerns about what could be unveiled in this month's Budget.
Mr Laidlaw’s comments follow reports in recent days that Tory politicians are preparing to unleash a second round of windfall taxes on North Sea oil and gas producers as part of their cash-raising plans.
It is understood that the levy on offshore operators could be raised from 25% to 30% and extended by three years to 2028. Officials have also been working on plans to widen the windfall tax to include electricity generators.
Writing in today's Telegraph, Mr Laidlaw says that some £200billion has been invested in Britain's energy infrastructure over the past 20 years - making it among the most resilient in the world.
Major investment
He adds: "That investment, whether in networks, renewables, nuclear or oil and gas, has been made by international and national energy companies.
"But now, with the autumn statement just two weeks away, the industry stands at a crucial juncture.
"The boardrooms of Oslo, Paris, Houston and New York are too far away to hear the whispers in the corridors of power in the UK, but concrete decisions taken in Westminster come through loud and clear.
"And the drumbeat grows louder as the chancellor searches for ideas to fill the £40billion hole in the public finances.
“Energy companies are acutely aware of the societal and economic consequences of higher bills. With higher profits, they expect to pay higher taxes.
"However, it is a question of balance. And when the chancellor delivers his statement, he will send a clear message to global energy investors - be they focused on traditional or new investments - about whether or not the UK is the right place to put their capital.
Foundation for investor confidence
"Maintaining a stable and predictable tax regime is the foundation for investor confidence. For energy companies, which require a great deal of long-term capital expenditure, it is vital.
"The UK may be an energy island, but the competition for capital stretches far beyond its borders. Global investors have a choice where to allocate their funds.
"Fresh capital is also in short supply, constrained by climate-change ambitions and environmental, social and governance (ESG) investing. While international and national energy companies are enjoying higher returns right now, new projects need to be funded from existing cash flows.
Therefore, capital allocation will favour projects in jurisdictions that maintain a long-term approach to taxation - just as the UK Government considers the second change to tax policy in only six months."
Mr Laidlaw says it is stability, rather than the absolute tax rate, that is key.
He explains: "Take Norway, for example. The country has continued to attract investment despite its very high headline tax rate. Why? Because little has changed in the past three decades - and because its investment allowance ensures investors can recycle capital from existing projects into new ones.
Norway in enviable position
"As a result, Norway is now in the enviable position of being energy independent and a vital supplier of gas and power to the rest of Europe. Exactly the position the UK wishes for itself.
"The UK's new Prime Minister Rishi Sunak knows this all too well - and, to his credit, introduced an investment allowance alongside the energy profits levy to encourage energy security while he was in No.11.
"Energy companies can see the political and social challenges of higher profits at a time when business and household customers are paying extra for their energy and, in some cases, can't afford to pay for the energy they need - even with the Government's support schemes in place.
“The industry understands the need to shelter customers from exceptionally-high bills and accepts that, where a true windfall exists, it should play its part alongside other windfall beneficiaries.
“However, if energy companies have been beneficiaries of higher commodity prices, so too has the Treasury, with its tax take from the sector so far in 2022 up nearly 700% on last year, following the introduction of the energy profits levy in May. This year alone, an estimated £12billion of total receipts will come from the sector.
“So a balance has to be struck between any further windfall taxes and undermining fragile investor confidence.”
Mr Laidlaw says that energy investors will be following developments at Westminster closely.
And he adds: “Their investment capital and the UK’s energy security are at stake.”