Harbour Energy to cut jobs due to UK windfall tax

Harbour Energy to cut jobs due to UK windfall tax

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LONDON — The British North Sea’s biggest oil and gas producer Harbour Energy told its staff that it plans job cuts in the wake of a windfall tax imposed on the sector last year, the company said on Wednesday.

The jobs would be cut in Harbour Energy’s headquarters in the North Sea hub of Aberdeen, Scotland, but the extent of the cuts is yet to be determined and will be subject to consultations.

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Harbor Energy Plc has 1,700 employees worldwide, according to its website.

The job cuts are a further sign of how the windfall tax, aimed at helping the British government deal with soaring energy costs, is deterring investment in the North Sea, one of the world’s oldest offshore oil and gas basins.

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Harbor shares were down 0.3% at the close of trading, compared with a 0.4% gain for the broader European energy index .

Prime Minister Rishi Sunak’s government last November hiked the Energy Profits Levy (EPL) on oil and gas companies from 25% to 35%, bringing the total taxes on the sector to 75%, one of the highest rates in the world.

“Following changes to the EPL, we have had to reassess our future activity levels in the UK… As such, we have initiated a review of our UK organization to align with lower future activity levels,” the company said in a statement to Reuters.

In the first half of 2022 the company reported a profit after tax of nearly $1 billion, compared with $87 million a year earlier.

Harbor will issue a trading and operations update on Thursday.

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Harbour had already announced in December that it would review its capital allocation plans and shun an oil and gas licensing round in the North Sea.

“We will continue to support investment on the many attractive opportunities within our existing portfolio, but we are scaling back investment in other areas such as new exploration licensing,” Harbour said.

Executives in North Sea companies have urged the British government to introduce a price floor to mitigate the impact of the windfall tax as firms struggle to access new funding.

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The tax could also jeopardize new investments in the aging basin, executives warned, putting it at odds with the government’s drive to improve domestic energy security after the Ukraine war highlighted the risk of relying on foreign supplies.

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Industry group OEUK said in response to Harbour’s announcement that the windfall tax will further undercut spending.

“These tax increases, and the threat of more to come, have made the UK a much riskier place to invest and so makes it far more likely that investors will look overseas instead,” OEUK sustainability director Mike Tholen said in a statement.

Companies including Shell Plc and Equinor ASA have already said they will review their North Sea investments. France’s TotalEnergies SE said it would cut investments in Britain by a quarter this year.

(Reporting by Ron Bousso; writing by Shadia Nasralla; editing by Louise Heavens, Jonathan Oatis, Kirsten Donovan)

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