Britain faces £100m loss from drilling in biggest new oilfield, study finds | Oil
The government stands to suffer a loss of more than £100million if drilling in the UK’s largest undeveloped oilfield is approved, according to new research examining a tax break introduced by Rishi Sunak.
Sunak made a dramatic U-turn last May when he introduced the ‘energy profit tax’ as Chancellor – effectively a one-off tax on energy producers. However, he also introduced a very generous tax break for fossil fuel producers to ensure that “the more a company invests, the less tax it will pay”.
According to research seen by the Observer, this could contribute to a £114m loss to the government over the life of the Rosebank field in the North Sea. This will put pressure on Sunak, who has already downgraded the role of climate change minister and said he will not attend the Cop27 meeting in Egypt. He is under pressure to sanction a significantly expanded windfall tax as part of next month’s medium-term budget plan.
Permission to develop the Rosebank field, west of Shetland, has been requested by Equinor, the Norwegian state oil company. Equinor said it hopes to make a final investment decision by next year.
When all set-up and decommissioning grants and tax breaks are factored in, new analysis from WWF Norway suggests the UK government will suffer a loss of around £100m on Rosebank. “The UK government would have been better off with the previous tax regime – before the introduction of the windfall tax and its loophole – which could have guaranteed an additional tax revenue of £508 million,” Guro Lystad said. , Senior Advisor on Climate and Energy at WWF Norway.
Equinor currently only operates three oil and gas fields in the UK, two of which are cross-border projects with Norway. The UK public will effectively cover 91% of Rosebank’s development costs through grants and developer tax breaks, according to the research.
Tessa Khan, director of campaign group Uplift, said: “If this government approves of Rosebank, the British public will be poorer while the Norwegian public, who own most of Equinor, will be wealthier. It’s that simple. The Prime Minister must close this gaping loophole in the current windfall tax, which he introduced.
A spokesperson for Equinor said no final investment decision had been made, adding: “The idea that the British public will pay anything to Equinor and its Rosebank partners is simply wrong. . In Rosebank’s Socio-Economic Report, compiled by WoodMac this summer, it was estimated that Rosebank will create £8.1bn of direct investment, of which £6.3bn is likely to be invested in UK-based businesses. UK.
“If we don’t develop Rosebank, demand remains and the UK risks becoming more dependent on imports (which have a higher CO2 footprint) while losing jobs, industrial and supply chain development, as well as future tax revenue.”
A government spokesperson said: “There will be continued demand for oil and gas over the next few years as we transition to cleaner, low carbon energy – this ensures we protect energy security , British jobs and industries, without becoming more dependent on foreign imports. . The Energy Profits Levy, on top of a 40% headline tax rate for industry, is set to raise £17billion this year and next to help fund cost-of-living support for eight millions of people. We also want to see the sector reinvest its profits to support the economy and future energy security.