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BP’s investment pledge fails to quell calls for UK windfall tax 

 May 4, 2022

BP failed to fend off the political cry for a tax on energy after emphasizing at its annual meeting the promises to invest all of its profits from its North Sea oil and gas production in the next decade back in the UK.

One government official said Chancellor Rishi Sonek wants a “significant new investment” from energy companies beyond BP and Shell’s statements aimed at avoiding excessive tax as they reported quarterly record profits last week.

BP CEO Bernard Looney told shareholders on Thursday that the company would reinvest “every pound we earn and hopefully more” with a view to investing £ 18bn in the UK by the end of 2030.

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But one senior government official said “it does not appear to be [BP’s statement] This is something new. “

Sunak has informed energy groups that it will tax them excessively unless UK-based oil companies substantially improve their existing UK investment plans in the coming years.

Sunak said Thursday he wants to see new investment commitments from oil companies “soon”, adding: “If that does not happen [materialise] So there are no options off the table. “

Boris Johnson, the prime minister, said Thursday he does not like excessive taxes but Refused four times to deny The idea.

BP is one of the few manufacturers in the North Sea to have released a list of planned investments, including £ 1 billion in charging an electric vehicle and about 6 gigawatts of marine wind energy. But it coped Criticism from the Treasury That these plans do not go far enough.

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Lonnie said the £ 18bn investment plan represents 15 to 20% of the group’s global capital expenditure, compared to 10% to the 15% BP had previously deployed in the UK.

He added that these spending plans are not conditional on whether the UK government has introduced an excessive tax, but rather that such a policy could hurt the UK’s goal of greater energy security. “By definition, excessive taxes are unpredictable and could undermine investment in homemade energy.”

The North Sea Offshore Energies UK has said it hopes to meet spending commitments from oil and gas producers that will meet government requirements next week.

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But OEUK CEO Deirdre Michie told the Financial Times that companies need time to adjust their long-term investment plans. “You can not just turn on and off [the] Taps that way it does not work, “she said.” Decisions made today need to be made with confidence. ”

Shell said it expects to invest £ 20bn to £ 25bn in the UK energy system over the next decade, with at least 75% earmarked for low-carbon projects, but provided little further details.

Harbor Energy, the largest oil and gas producer in the North Sea, declined on Thursday to say how much money it would reinvest in the UK.

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London-based Serica Energy, which accounts for about 5% of UK gas production, insisted it was “developing new investment plans to accelerate production from its assets”. But CEO Mitch Peleg added that excessive taxation could affect his ability to “finance and invest in these programs.”

Ministers are increasingly aware of the political optics of refusing to raise taxes on record-breaking oil companies while the public faces a huge rise in energy bills as global energy prices soar. Shell last week reported quarterly adjusted earnings of $ 9.1 billion, the highest it has recorded, while BP’s core earnings of $ 6.2 billion were the best since 2008.

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Labor’s shadow energy secretary, Ed Miliband, said: “The tax case on oil and gas giants earning a record while energy bills are spinning for working people has been clear since Labor first proposed it in January. How much longer does this government need to decide?”

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