PRESSURE mounted on George Osborne to rethink his oil profit tax raid yesterday, as more oil firms threatened to shelve lucrative projects in the North Sea in protest at the chancellor’s surprise levy.
Gas giant Centrica, oil explorer Valiant and French group Total all said yesterday they are reviewing current and future investments in the North Sea following the plan in last week’s Budget to hike the North Sea supplementary charge from 20 to 32 per cent overnight.
Centrica just last month pledged to invest £450m in two gas fields but has joined the growing number of firms lobbying Osborne to modify his plans.
“We are reviewing all projects, including fields that are in current production and projects that are coming down the pipeline,” a spokesperson told City A.M. yesterday. “Each project has a different [tax] regime attached to it, and it will take some time to work through. There is still work going on at the fields.”
Total is also reviewing its £170m annual spend on exploration in the North Sea, the French firm’s vice president for northern Europe Patrice de Vivies told an oil conference in Aberdeen yesterday.
Valiant, which has seen its shares tumble more than 10 per cent since the news last Wednesday, has reportedly scrapped projects worth more than £100m. It issued a statement that did not detail specific cuts, but chastised the chancellor for his “unclear” policy that “will reduce investment, put further pressure on oil and gas supply in the UK and ultimately could drive oil prices up further”.
The trio follow Norwegian oil giant Statoil, which on Tuesday said it was suspending a $10bn (£6.2bn) project at the Bressay and Mariner oil fields – two of the most valuable deposits left in the North Sea – to review whether the investment is still worthwhile.
Oil & Gas UK, which represents almost 120 firms in the industry, is due to meet energy secretary Chris Huhne today for the first government consultation on the tax since it was unveiled.
Yesterday, a senior Treasury source told City A.M. the chancellor had been forced to raid North Sea tax profits because the public was expecting significant action on fuel duties ahead of the Budget.
The Treasury hopes to make £10bn from the tax grab over the next four years to fund a petrol duty cut.
Ed Balls, shadow chancellor, put soaring petrol costs at the heart of Labour’s economic message in the weeks before the Budget, in a bid to capitalise on growing concern over the rising cost of living.
Osborne’s tougher stance on oil firms sharply contrasts with that of US President Barack Obama, who yesterday unveiled attractive tax breaks for oil companies operating in the States in a bid to start weaning the world’s biggest economy off fuel imports.