North Sea oil and gas has duty to pay windfall tax and ease cost-of-living crisis, claims Anas Sarwar
The North Sea oil and gas industry is facing further pressure to act on the cost-of-living crisis and accept a windfall tax that would strip “millions out of the pockets of shareholders” and help those hardest hit by soaring energy bills.
Anas Sarwar, leader of Scottish Labour, attending an oil industry conference in Aberdeen on Tuesday, said the sector had a “responsibility” to act given the “exponential and unexpected” profits of some large oil companies.
Earlier this month, Shell reported a record first quarterly profit of £7.3 billion, driven by a sharp rise in oil and gas prices, with BP’s profits doubling to £4.9bn over the first three months of the years. Both figures outstripped the predictions of analysts.
Deirdre Michie, chief executive of Offshore Energies UK, told delegates that imposing a windfall tax could disrupt a potentially “remarkable British success story" by blocking investment in the sector’s transition to green energy while securing domestic supply in the face of the war in Ukraine.
But Mr Sarwar claimed that a proposed one-off windfall tax, which Labour estimate could raise £2bn, would not harm long-term investment in the North Sea.
He said: “It might not be the easiest audience to say this to, but I think it’s important to speak truth to power and when you see record profits being made by energy companies and people’s energy bills going up exponentially, I think it is fair and right that we have a windfall tax on the oil and gas giants and we put that money directly back into people’s pockets.
"Of course we have to have investments in the transition. But what we’re talking about is stopping millions of pounds going into shareholders bank accounts, not stopping investments.
“We need urgent help. The oil and gas has, of course, a responsibility in terms of its transition, but it also has a responsibility in terms of the cost-of-living crisis.”
The Offshore Energies UK conference brought together energy leaders in oil, gas and offshore wind, plus the emerging technologies of mass hydrogen production and carbon dioxide (CO2) capture and storage, both which are viewed as key to the future of Scotland’s green energy market.
The conference examined progress on the North Sea Transition Deal, the landmark agreement signed with the UK Government last year, which set out the basis of a multi-decade project to decarbonise the UK’s energy systems, reaching net zero by 2050.
Ms Michie said the industry was willing to invest up to £250bn by 2030 on meeting the targets, but warned the challenge required long-term planning backed by stable and predictable tax and regulatory regimes.
She claimed a windfall tax would deter investors, drive up the price of borrowing and risk delaying or halting major projects.
Spain and Italy have both introduced such a tax.
The UK’s offshore oil and gas operators were already expected to pay £7.8bn in net tax on profits this year, plus another £5bn next year.
Prime Minister Boris Johnson and Chancellor Rishi Sunak have so far resisted calls for a windfall tax and instead urged the industry to keep investing in both decarbonisation and oil and gas production in UK waters.
Ms Michie said: "Our industry, given the complexities we have to deal with, has to think and invest in terms of years and often decades.
“Politicians, the media and campaign groups, however, operate on much shorter pressures and deadlines, whether they be impending elections, copy deadlines or fund raising.
“As a result, it means we are now facing the threat of punitive taxes and regulations, just at a time when the UK needs to focus on long-term issues like energy security and working for net zero.
“Much of this is really well-intended. Because the reality check for everyone, with millions of households in fuel poverty, is that there is an unprecedented cost-of-living crisis to pay for, at the same time as we have an environmental emergency to deal with.
“But our belief is that stability in the way we are taxed and regulated is what allows us to promote investment, create jobs, and generate taxes that can be used to help with the cost-of-living crisis, while at the same time getting the balance right in terms of ensuring the nation’s energy security."
Richard Lochhead, minister for just transition, employment and fair work, also attended the conference.
The SNP backs a “broad-based” windfall tax on all companies which made excessive profits during both the pandemic and energy crisis.
Mr Lochhead said: “The Government’s position is we do support a windfall tax as a means of addressing the cost-of-living crisis. It should not simply apply to companies based in Scotland or the North East of Scotland’s oil and gas companies.
"It should tackle all the big businesses who have made a lot of money in profits, whether it is the pandemic or rising energy prices or whatever. North East oil and gas wouldn’t be excluded from that, but they wouldn’t be targeted. We think that would be unfair to target one sector and one area of the country.”
Meanwhile, the General Assembly of the Church of Scotland has called for a windfall tax on oil and gas companies to help tackle the "crisis of fuel poverty".
Commissioners backed a motion urging the UK Government to take immediate action to help the poorest in society who have been hit hardest by soaring energy bills by 288 votes to 83.
Want to join the conversation? Please or to comment on this article.