CAPITAL STRIKE

Equinor Warns Windfall Tax May Discourage Its UK Investments

By Charles Kennedy - Aug 28, 2024

• Equinor is uncertain about future investments in the UK North Sea due to the Labour government's proposed tax changes.
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• The increased windfall tax and removal of tax relief could make investments less economically viable for Equinor.
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• The company is considering the impact of these changes on its Rosebank oilfield project and may adjust its investment plans accordingly.
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Equinor awaits clarity on the UK tax regime by the Labour government before strategizing and committing to investments in the UK North Sea, a senior executive at the Norwegian company told Reuters on Wednesday.

The Labour Party has pledged to further raise the already high windfall tax on oil and gas profits in the North Sea and scrap tax relief for operators for part of the investments in oil and gas assets they have made.

“We need to look at our appetite to invest further in the UK based on the fiscal regime ... it could be that the economics are really, really hard impacted,” Philippe Francois Mathieu, Executive Vice President, Exploration & Production International at Equinor, told Reuters on the sidelines of an industry conference in Stavanger, Norway.

Last month, the Labour government said that it intends to raise the rate of the Energy Profits Levy (EPL) to 38% from 1 November 2024, from 35% now, bringing the headline rate of tax on upstream oil and gas activities to 78%, up from 75% currently. The levy will be further extended by a year to

31 March 2030, while the EPL’s investment allowance will be removed.

The plans have led to a backlash from North Sea oil and gas producers who have signaled that the uncertainty in the tax regime in the UK will further drive investments away and undermine investments in low-carbon technology and solutions, too.

Producers have already warned they are considering moving to more fiscally stable jurisdictions such as Norway.

Norway’s Equinor operates the Mariner field offshore the UK and decided last year to invest $3.9 billion (£3 billion) in the first phase of development of the Rosebank oilfield, one of the biggest offshore oil and gas projects in the region in years.

If the UK fiscal regime changes again with higher taxes, Equinor will “need to look into what we want to do further with the Rosebank project,” Mathieu told Reuters.

By Charles Kennedy for Oilprice.com