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The boss of one of Britain’s leading independent oil and gas producers said the company was “very actively” looking for opportunities overseas, likening navigating the country’s fiscal regime to working in a “war zone”.
The comments by David Latin, chairman and interim chief executive of London-based Serica, come just days before the general election, with Labour’s pledge to raise unexpected taxes on manufacturers dominating the campaign in Scotland.
“Other than when I was responsible for a company that had significant assets in a war zone, I have never encountered a situation that was so challenging in terms of investment decisions,” Latin said at the company’s annual general meeting on Thursday.
He noted that neither Labor nor the Conservatives had pledged in their manifestos to cut windfall taxes to recognize the fall in prices. He added that Labour’s plan to increase and reduce tax credits for capital investment would make most North Sea projects unprofitable.
Latin was previously an executive at energy company OMV, where he dealt with disruptions to the company’s operations in Libya following the fall of late leader Muammar Gaddafi.
The boss of Serica said the company, whose British operations are in the North Sea, would not leave the UK but an increasingly difficult business environment would force it to look elsewhere for growth.
“While we are still looking at opportunities in the UK that could be attractive despite this increasingly challenging situation, we are also very actively looking overseas,” he said.
Serica contributed around £500m in UK taxes as of 2020 and is responsible for around 5 per cent of the country’s gas production.
Smaller companies, which increasingly dominate the aging North Sea basin after the big companies pulled out, say they are subject to punitive taxation that has severely damaged profits and made investment uneconomic.
Separately, Labour’s biggest funding union fund Unite, along with Scottish businesses, demanded on Thursday that the party drop its opposition to new North Sea oil and gas exploration until it can provide a plan to replace the jobs that would be lost.
Labor has a lead of more than 20 points ahead of the July 4 election. The party’s plans to increase the windfall tax on oil producers from 75 per cent to 78 per cent have prompted warnings from business and unions that up to 100,000 jobs, mostly in Scotland, are at risk.
Labor has also pledged to remove “unduly generous investment allowances” that companies can use to reduce their taxes and stop licensing new fields in the North Sea, which it says would worsen the climate crisis without ensuring energy security.
The Conservative government, which introduced the surprise tax after the outbreak of the Russia-Ukraine conflict in 2022, has pledged to keep the tax in place until 2028-29 unless prices fall “to normal” sooner. He also plans to pass legislation that would mandate annual licensing rounds for oil and gas production.
The Scottish National Party, which is losing support from Labour, said decisions on oil and gas development, which are reserved for Westminster, should be made on a case-by-case basis and subject to a “thorough assessment of climate compatibility”. .
A group of more than 60 climate campaigners and lobby groups, including Greenpeace and Oxfam, called on the next UK government on Thursday to commit to phasing out oil and gas while ensuring a “clear and funded” transition for workers.
Labor has previously defended its unexpected tax policy. One party official told the Financial Times this month that it was common for companies to threaten to withdraw when faced with higher taxes.