Harbour Energy, one of the UK’s biggest oil and gas producers, has told staff it plans to cut jobs this year in response to an increase in windfall taxes on fossil fuel companies.
The company is starting a consultation as it reassesses its activities in the UK because of the rise in the “energy profits levy (EPL)”, which aims to capture a share of the bumper profits oil and gas producers have reaped since Russia’s invasion of Ukraine sent commodity prices soaring.
It is the first company to threaten job losses in response to the heightened tax burden, although France’s TotalEnergies has said it will cut investment in UK waters this year. Others including Shell have also been totting up the impact on their balance sheets of higher UK and EU windfall taxes.
UK chancellor Jeremy Hunt in November announced a 10 percentage point increase in the EPL to 35 per cent from January 1. The changes mean oil and gas producers in the UK now have an aggregate headline tax rate of 75 per cent.
The EPL was initially introduced in May by Rishi Sunak while he was chancellor under former prime minister Boris Johnson.
Harbour, which employs about 1,500 people in the UK, would not specify how many cuts it would make. The company has consistently warned the government that windfall taxes would lead to reduced investment in the North Sea, which would run counter to ministers’ aims to bolster domestic oil and gas production to provide more energy security.
Harbour said in December it would snub the UK’s latest exploration licensing round, aimed at raising production levels in future years, although the competition did attract other interest with more than 100 bids submitted to the North Sea regulator before it closed this month.
“Following changes to the EPL, we have had to reassess our future activity levels in the UK,” Harbour said on Wednesday.
“We will continue to support investment on the many attractive opportunities within our existing portfolio but we are scaling back investment in other areas such as new exploration licensing. As such, we have initiated a review of our UK organisation to align with lower future activity levels.”
Harbour, which is due to publish an update on its trading on Thursday, warned in November that it expected its total UK tax liability for 2022 to be in the region of $900mn, of which roughly $400mn is related to the EPL.