BP’s UK head said the government’s energy profits levy was unlikely to affect its North Sea investment plans, following confirmation that the measures would cease in December 2025.
Questioned by MPs at an environmental audit committee hearing on Wednesday, BP’s head of country for the UK Louise Kingham said it had been “really helpful” to receive clarification on the levy’s sunset clause of December 2025.
Then-chancellor Rishi Sunak unveiled the measures in late May after months of pressure. The levy would see around £5 billion in revenue raised over the next year by increasing the current headline rate of tax on oil and gas firms from 40% to 65%.
However, it also includes a substantial increase in the investment allowance to 80% which, on top of other measures, means firms will get 91 pence back per £1 spent for a total relief rate of 91.25%.
At the time, BP said it would need to consider “the impact of both the new levy and the tax relief on our North Sea investment plans”.
Responing to questions from the committee yesterday, Ms Kingham added: “We’ve still got a little bit of vagary around the sort of historic price and when we return to the price … so I think that will still hinder some in trying to do the detailed economics for their investment plans.
“What we know now without all of that clarity is that we don’t think at BP that the profits levy will impact on the investment plans we have in the North Sea.”
In May BP announced it would invest £18 billion in the UK over the next decade, three-quarters of which would be focused on low-carbon sources of energy, with the rest directed to its traditional oil and gas business.
At the company’s annual general meeting following the announcement, CEO Bernard Looney warned that “unpredictable” taxes such as this “would challenge investment in home-grown energy.”
Meanwhile, Shell’s UK country chairman, David Bunch, told the committee that the measures would not accelerate its North Sea investment by more than a matter of months.
“These projects are incredibly complex, they are sometimes decades in the planning and approval. So to try to speed them up or slow down is incredibly difficult; they tend to follow the pace that they follow safely in line with the regulatory process,” he said.
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