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Gulf Insider
6 days ago
- Business
- Gulf Insider
North Sea Oil Producer Slams The UK's Windfall Tax
The chief executive of Enquest criticizes the UK's Energy Profits Levy, claiming it is doing 'irreversible damage' to the oil and gas industry and discouraging investment. Due to the heavy tax burden, the company is planning a 'disciplined approach' to investment and expects to pay a significant amount in windfall tax in June 2025. Enquest argues that the UK is the only country levying a windfall tax on its domestic energy producers where no windfall profits exist, further impacting competitiveness. The boss of Enquest has slammed the windfall tax on oil and gas firms as doing 'irreversible damage' to the industry and 'driving job losses across the sector'. Amjad Bseisu, Enquest's chief executive, called for the North Sea tax to be scrapped in an operations update on Tuesday after claiming it makes the UK a less attractive place to invest. The UK Energy Profits Levy (EPL) was introduced in May 2022 and applies to oil and gas companies operating in the North Sea. It is designed to tax the extra profits these companies made due to surging energy prices after Russia's invasion of Ukraine. Initially, the rate was 25 per cent, but it later jumped to 35 per cent in January 2023. The tax has been extended by Chancellor Rachel Reeves to run until March 2030, but has a 'price floor' mechanism, which allows it to end early if prices fall significantly. London-listed company Harbour Energy slammed the government's 'punitive fiscal position' earlier this month as it axed 250 jobs in Aberdeen. Bseisu argued: 'The recent stepdown in commodity prices has further amplified calls for the UK government to remove the Energy Profits Levy and return the North Sea to a position of global competitiveness.' The World Bank last month forecasted that weakening global growth amidst geopolitical turmoil was set to push commodity prices down 12 per cent in 2025, followed by another five per cent in 2026. This would mark the lowest levels of the 2020s and bring an end to the price boom fuelled by the COVID-19 pandemic recovery and the Russia and Ukraine war. Bseisu said the UK was 'the only country levying a windfall tax on homegrown energy producers, where no windfall profits exist.' As a result of the heavy tax burden, the FTSE 250 firm has laid out a 'disciplined approach' to investment plans for the next 18 months. The company plans to pay nearly $100m (£73.7m) in windfall tax in June 2025, which would mean most tax payments for the year will be made in the first half. As a result, the firm expects cash outflows to to be lower in the final six months of the year. Enquest expects operating expenses to top $450m in 2025 but remains committed to 'ongoing' cost reductions. Bseisu said: 'We remain focused on delivering a material UK transaction in the short term, and we are resolute in our belief that our relative advantages, both operational and fiscal, see us ideally placed as a North Sea consolidator.'
The Herald Scotland
27-05-2025
- Business
- The Herald Scotland
EnQuest slams windfall tax as Aberdeen oil and gas jobs lost
In an operations update, the company told stock market investors: 'We remain focused on delivering a material UK transaction in the short term,' adding that it is in 'ongoing discussions with multiple UK counter-parties'. The company released the update weeks after abandoning a bid to acquire North Sea-focused Serica Energy, which has a stock market capitalisation of £565m. EnQuest has seen its valuation fall to £212m following a drop of around a third in the price of the company's shares since March amid the volatility triggered by Donald Trump's tariff threats. READ MORE: Israeli-owned firm takes control of UK's biggest gas field Against that backdrop, the company said the windfall Energy Profits Levy was an increasingly unfair burden on firms which could have disastrous unintended consequences. "The recent stepdown in commodity prices has further amplified calls for the UK government to remove the Energy Profits Levy and return the North Sea to a position of global competitiveness,' said chief executive Amjad Bseisu in the update. 'The status quo, which sees the UK as the only country levying a windfall tax on homegrown energy producers, where no windfall profits exist, is resulting in irreversible damage to this strategic national industry and is driving job losses across the sector.' Earlier this month one of the biggest North Sea producers, Harbour Energy, announced plans to shed 250 jobs citing the continued challenging domestic fiscal and regulatory environment. In the update, EnQuest said it had launched a drive to cut costs to boost efficiency 'commensurate with a low commodity price environment'. The company did not elaborate on the implications for jobs in the North Sea operations it runs from Aberdeen. It has been approached for comment. READ MORE: SNP Government oil hypocrisy shocking amid Scottish jobs cull All the same, the update made clear that EnQuest still sees plenty of potential in the UK North Sea. 'We are resolute in our belief that our relative advantages, both operational and fiscal, see us ideally placed as a North Sea consolidator," said Mr Bseisu in the update. EnQuest became a significant force in the area after investing in assets it acquired amid tough times in the industry from firms that appeared to have lost interest in them, such as BP. EnQuest started production from the Kraken field off Shetland in 2017 (Image: EnQuest) The company's directors appear confident that the strategy makes sense amid the current downturn. This may create opportunities to acquire assets on attractive terms. Mr Bseisu's comment highlights the fact that EnQuest has accumulated historic losses that it can use to reduce the tax bills it will have to pay on the profits generated by its North Sea production operations. EnQuest incurred the losses amid moves to increase production from the assets it acquired. This has involved it drilling additional wells to help boost the recovery of reserves from existing fields and developing new ones such as Kraken. The company has continued with the strategy since the windfall tax was first introduced by the former Conservative Government in 2022. Mr Bseisu noted that EnQuest recently increased output from the Magnus field north east of Shetland to the highest level since 2022. The success reflected 'strong reservoir management and good infill drilling results'. EnQuest expects to start production from a further infill well on Magnus next month. The company acquired Magnus and related assets from BP in deals worth $385m in total in 2018, amid the slump in the area that started after oil prices plunged in 2016 as growth in supplies ran ahead of demand. READ MORE: North Sea drilling curb plans look mad amid Trump trade threats EnQuest acquired control of the undeveloped Bressay oil field east of Shetland from Equinor in July 2020 for an initial £2m, following the plunge in oil prices caused by the pandemic. In January EnQuest acquired Harbour Energy's Vietnam business in an $84m (£62m) deal. It has long had a presence in Malaysia. The company said it sees 'significant upside across its existing Asia portfolio, and is in advanced discussions around a further new country entry'. EnQuest made $94m profit after tax in 2024 on sales of $1.2bn. When EnQuest and Serica ended takeover talks early this month the companies said that market volatility had made it impossible to agree the terms concerned. READ MORE: North Sea oil giant plans $500m investor payouts as it cuts jobs Serica announced in March that it was in talks with EnQuest regarding a deal that would have created a company with increased scale, unlocked significant synergies and created a stronger platform for further growth. It was expected then that EnQuest would make an all-share offer for Serica.
