Harbour Energy blames windfall tax as it slashes hundreds of UK jobs
Harbour Energy is expected to cut 350 jobs in the UK, as it downgrades domestic operations following the windfall tax.
The UK’s largest oil and gas producer put the blame for its decision at the hands of the government, which has hiked the Energy Profits Levy to 35 per cent.
On top of the 40 per cent special rate for corporation tax, this brings overall levies on producers to 75 per cent.
It is now expected to run until 2028 – a further three years on original plans.
The company has been undertaking a review of its operations since January, after warning that it was re-assessing its future activity in the UK.
It later confirmed plans to cut jobs last month during its full-year results, when the company revealed its £2.1bn profits had been effectively wiped out through taxes, including a £1.3bn charge from the windfall tax.
Its net profits eventually totalled just £7m.
The company revealed it plans to pivot operations from the UK, which makes up 85 per cent of its revenues.
It is now looking to to bolster projects in Mexico and Indonesia, and pulled out of the licensing round for new oil and gas projects in the UK last year.
The vast majority of its 1,200 UK onshore staff are based in Aberdeen, Scotland, and Harbour explained that it was working hard to mitigate the impact of the workforce reduction.
A Harbour spokesperson said: “We are working hard to mitigate the impact of this reduction, by for example, a recruitment freeze and opening a voluntary redundancy scheme. These figures do not include UK-based corporate and international roles, which are still being reviewed.
“Nor do they include our offshore organisation, where we expect the impact to be significantly lower. We are very conscious of the impact of this news on our people, and we are carrying out the review fairly and with consideration for everyone who is affected.”
Harbour recently received approval to develop the Talbot oil field in the North Sea and is also involved in two carbon capture projects shortlisted for Track 2 funding later this decade.
The company has its own CCUS vehicle, Viking CCS – as it plans to repurpose its wider portfolio of gas fields.
Earlier this week, it told City PM the government was mistaken to not bring a price floor into the windfall tax on Green Day last week – which would have kicked in when oil prices returned to conventional trading levels.
“Industry has repeatedly asked government to introduce a floor price mechanism into the levy to ensure the tax is appropriately targeted at realised windfall profits and ceases to apply when oil and gas prices fall,” a spokesperson for Harbour told City A.M.
This request has been echoed by Enquest and Ithaca Energy.
City A.M. understands however, that North Sea oil and gas companies are making decisions based on long-term effects of taxes and capex, meaning there is no guarantee a price floor could reverse Harbour’s decision.
The government has been approached for comment.