UK Oil And Gas Giant Cuts Investments And Defers Projects Over Windfall Tax

Authored by Tsvetana Paraskova via OilPrice.com,

Ithaca Energy, one of the largest oil and gas producers in the UK, has reduced investments and is deferring some projects this year and next, due to the burden of the windfall tax Britain has levied on the industry.

The windfall tax, the so-called Energy Profits Levy, has prompted many companies operating offshore the UK to cut investments and review projects.

After the UK raised the windfall tax to 35% at the end of last year, Harbour Energy, the biggest oil and gas producer in the UK North Sea, backed out of the latest licensing round aimed at awarding more than 100 new licenses. Shell has said it would be re-evaluating each project comprising its $30.5 billion (25 billion pounds) planned investment in the UK energy system, and TotalEnergies has said it would slash its investment in the UK by 25%.

In its first-half results release, Ithaca Energy said this week that “until the fiscal regime is improved, as a direct result of the Energy Profits Levy, investment across our operated and non-operated portfolio has and will reduce, including the deferral and cancellation of certain 2023 and 2024 projects, impacting medium-term production outlook, with production in 2024 expected to be lower than 2023 levels.”

“As part of the Group’s strategy, we continue to leverage our M&A capabilities evaluating potential inorganic opportunities with the clear intention to increase our production in the medium-term.”

Gilad Myerson, Ithaca Energy’s Executive Chairman, said,

“The Energy Profits Levy continues to have a direct impact on investment in the UK North Sea and Ithaca Energy’s own investment programme across its diverse high-quality operated and non-operated asset base. We continue to constructively engage with the UK government to highlight the impact of the current fiscal regime to the industry’s outlook and to the UK government’s stated energy security and Net Zero ambitions.”

Also this week, Harbour Energy said it booked an $8-million loss for the first six months of this year – weighed down by the higher UK windfall tax rate and falling fossil fuel prices. For the same period of 2022, the firm reported nearly $1 billion in post-tax profit.