A senior executive at a leading UK operator warns that the present windfall tax and the Labour Party’s commitment, which is projected to win the forthcoming UK election, to halt new oil and gas permits in the North Sea could deplete Britain’s energy resources.
Ithaca Energy’s Executive Chairman, Gilad Myerson, explained to the BBC, “A new government, presuming they can discontinue licenses and oil development in the UK, would essentially lead to an energy shortage in the UK, making us heavily reliant on overseas energy.”
The 35% windfall tax, pushing the total tax rate in the industry to an unprecedented 75%, the highest in any UK sector, and Labour’s intentions to cease issuing new licenses have caused apprehension amongst North Sea oil and gas operators and investors, added Myerson.
A significant downturn in investment would inevitably lead to the UK becoming more reliant on international fossil fuel resources, a top executive from one of the biggest UK-centric firms disclosed to the BBC.
“Politicians continue to make remarks that unsettle investors,” he stated. “Their messages are inconsistent, sometimes indicating they want hydrocarbons, then expressing they don’t.”
Labour’s leader, Keir Starmer, has declared that if Labour comes to power next year, they would cease issuing new permits for North Sea oil and gas. However, they would honour the permissions and licenses granted by previous administrations. The ambiguity surrounding Labour’s potential actions, if they secure power next year, has jeopardized the approval of Equinor’s significant Rosebank oil project.
Starmer affirmed last week that if the current Tory government approves licenses and projects, a Labour government would not reverse them if elected.
The chief executive of industry body Offshore Energies UK, David Whitehouse, stated, “Labour’s anticipated prohibition on new exploration licenses is premature and excessive. It could be detrimental to the industry, to consumers, and to the UK’s goals for achieving net zero emissions.”
The industry has already started to react to the regulatory uncertainty. Companies such as Apache, Harbour Energy, Shell, and TotalEnergies have publicized plans to either reduce their investments and drilling activities or reconsider their current strategies.
