UK companies servicing oil and gas operators have today urged the Prime Minister and the Chancellor against a windfall tax.

In an unprecedented move, 31 organisations in the UK’s offshore energy supply chain have written an open letter calling for an end to speculation on the tax at a time when many were only beginning to enter recovery following downturns.

The signatories include manufacturing and technology companies which have a wide footprint of offices and workshops across the UK employing thousands of people. In the letter issued on their behalf today by trade body Offshore Energies UK which represents over 400 companies in the sector, they warn that the industry is only in the early days of a recovery, after companies suffered significant losses stretching in recent downturns.

The letter explains: “A one-off windfall tax on energy producers will not sustainably help consumers and will only further reduce investor confidence in the UK, the ripple effect of which we will feel for many years to come. And it will do nothing to address the cyclical nature of an energy system linked to global supply and demand, with the UK becoming much less attractive to investors who will look elsewhere for the long-term stability they require to progress major energy projects.”

The full text of the letter can be found below alongside a comment from OEUK Chief Executive Deirdre Michie OBE.

To:

Prime Minister Boris Johnson
Chancellor Rishi Sunak

In the search for solutions to today’s cost of living crisis, the need for long term thinking has never been greater.

We look at current calls for a windfall tax on energy producers with grave concern that it would be a blunt short-term response which could undermine the levers to long term solutions.

Our companies, still recovering from the last downturn, today help support some 200,000 jobs and contribute billions to local economies across the UK. As an already fragile supply chain supporting these producers, any further risks to future activity would have severe consequences.

During the 2015 downturn, the depression of global oil prices resulted in some 150,000 jobs lost in the UK oil and gas sector alone, with most of these felt by colleagues in our own organisations. We are in the early days of what we hope will be a form of recovery – one that is already yielding results for UK taxpayers.

Operators are set to pay £7.8bn in production taxes this financial year alone – a tangible turnaround after significant losses of previous years. These monies could be used to offset the consumer crisis while not undermining crucial investor confidence. To date this industry has paid over £375 billion in production taxes alone – equivalent to building more than 4,000 hospitals while supporting thousands of supply chain jobs in the process.

A one-off windfall tax on energy producers will not sustainably help consumers and will only further reduce investor confidence in the UK, the ripple effect of which we will feel for many years to come. And it will do nothing to address the cyclical nature of an energy system linked to global supply and demand, with the UK becoming much less attractive to investors who will look elsewhere for the long-term stability they require to progress major energy projects.

Undermining the UK’s oil and gas fiscal regime, just as we start to turn a corner of recovery risks sparking a chain of events which could slow down the energy transition. For our companies, any surprise windfall tax risks operators – big and small – scaling back their investment plans in response. The ramifications of any halt in investment will be felt throughout the supply chain, through jobs, and the communities this industry supports, both directly and indirectly.

For the tens of thousands of jobs this industry supports, the impact of a windfall tax will be even greater in the long term. This is not least because it follows a downturn felt especially hard by the supply chain side of the industry, with thousands of manufacturing roles lost up and down the country.

International competition to support the shift away from Russian supplied oil and gas is hot. Many countries are already leading the pack in both energy security and clean energy capabilities. If the UK wants to reduce its reliance on imports and gain first mover advantages that can be exported globally, investment in the production of cleaner energies must be made urgently.

At the same time, oil and gas production remains a predictable source of income for many of our companies, which gives us the headroom to build capacity and capability in cleaner energies. This is imperative if we are to create new green jobs that the UK needs. It is unclear where the £1 trillion investment required would come from should international operators decide to pivot away from the UK in response to an unpredictable fiscal regime. We would risk new green jobs going overseas and once the opportunity is missed it won’t come back round.

The UK is on the cusp of a transition towards cleaner energies. We are on a mission of a scale not seen since the industrial revolution. The mass re-engineering of the UK’s energy system will require a sustained pipeline of skilled people, innovation, and investment over decades.

We agree with government that as much of those energies as possible should be produced here in the UK to secure our energy supply and build new economic sectors here both for use in the UK and to export skills and UK manufactured equipment globally. This will require significant investment from industry as agreed under the North Sea Transition Deal.

Increasing the availability of home-produced resources means that consumers can look to a future of greater reliability and stability in their heating and electricity bills. More than this, that energy will come with an increasingly lower carbon footprint as near-term profits are invested in producing energy more sustainably.

Today’s cost of living crisis reinforces why the ambition to build back better can’t be undermined by the pursuit of short-term solutions.

We hope that politicians of all parties will consider the full implications and broader policy levers to bring about our shared goal – the production of secure, cleaner, more affordable home-produced energy to help millions across the UK, for the long term.

Signed by:

• Kevin Franklin, Chief Executive Officer, 3T Energy Group
• Sian Lloyd Rees, OEUK Supply Chain Champion
• Ryan Menzies, Group Managing Director, Apollo
• Katy Gifford, Chief Executive Officer, Aubin Group
• Romain Chambault, Vice President Global Services & Offshore, Baker Hughes
• Sandy Bonner, Executive President, Region UK, Bilfinger
• Charlie Leslie, Director, Blade Energy Partners
• Colin Black, Managing Director, Carjon-NRG
• Colin Rowley, Managing Director, Dron Dickson
• Ian Mills, Managing Director, Exceed
• Nassima Brown, Director, Fennex
• Katherine Milne, Customer Relations Manager, Global E&C
• Steve Nowe, Senior Area Manager, Europe, Halliburton
• Bob Drummond, Chief Executive Officer, Hydrasun
• Sandy Reid, Managing Director, ODE Asset Management
• Neill Crone, General Manager, Offshore Water Management
• Chris West, Chief Executive Officer, Optimus Plus
• Simon Rio, Chief Executive Officer, PD&MS Group
• John Pearson, Chief Operating Officer, Petrofac
• Olivier Renaud, Managing Director, Ponticelli
• Louise Wood, Managing Director, Prodrill Energy Resource Solutions
• Brian Mercer, Managing Director, Semco Maritime
• Steve Hunt, Regional Director UK, Stork
• Steve Wisely, Senior Vice President, Subsea7
• Sarah Cridland, Vice President Commercial & Subsea Projects UK, Med & Caspian – UK Country Manager, TechnipFMC
• Tina Booth, Office Manager, Tees Medical Services
• Rebecca Rainbow, Group HSEQ Manager, Texo Group
• Walter Thain, Chief Executive Officer, Three60 Energy Group
• David Clark, Chief Executive Officer, Vysus Group
• Craig Shanaghey, President – Operations, EMEA, Wood
• Daniel McAteer, Vice President – Energy, Worley

OEUK Chief Executive Deirdre Michie said:
“After significant downturns which saw the offshore energy industry lose thousands of jobs, we need to encourage investment in cleaner energies and the sector which supports it.

“This industry is committed to supporting the country’s energy security, economy and net zero ambitions – now is the time for us to work together to drive action.”

KeyFacts Energy Industry Directory: Offshore Energies UK

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