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The boss of one of the UK’s top independent oil and gas producers has said the company is “very actively” seeking opportunities overseas, as he compared navigating the country’s fiscal regime to working in a “war zone”.
The comments by David Latin, chair and interim chief executive of London-listed Serica, come just days ahead of the general election, with Labour’s pledge to increase windfall taxes on producers set to dominate campaigning in Scotland.
“Other than when I was responsible for a company which had significant assets in a war zone, I have never encountered a situation which was so challenging when it comes to making investment decisions,” Latin said at the company’s annual general meeting on Thursday.
He noted that neither Labour nor the Conservatives had committed in their manifestos to cutting windfall taxes to recognise a decline in prices. He added that Labour’s plan to raise them and reduce tax relief for capital investments would make most North Sea projects unprofitable.
Latin was previously an executive at energy company OMV, where he dealt with disruption to the company’s operations in Libya following the fall of the late leader Muammer Gaddafi.
The Serica boss said the company, whose UK operations are in the North Sea, would not abandon the UK but that an increasingly difficult trading environment would force it to look elsewhere for growth.
“While we remain watchful for opportunities in the UK that might be attractive despite this increasingly challenging context, we are also looking very actively overseas,” he said.
Serica has contributed about £500mn in UK taxes since 2020 and is responsible for about 5 per cent of the country’s gas production.
Smaller companies that increasingly dominate the ageing North Sea basin after the majors retreated argue they are subject to punitive taxation that has seriously dented profits and made investments uneconomical.
Separately, Labour’s biggest union funder Unite together with Scottish businesses on Thursday demanded the party drop its opposition to new oil and gas exploration in the North Sea until it can provide a plan to replace jobs that would be lost.
Labour has a polling lead of more than 20 points ahead of the election on July 4. The party’s plans to raise the windfall tax on oil producers from 75 per cent to 78 per cent have prompted warnings from businesses and unions that as many as 100,000 jobs, mostly in Scotland, are at risk.
Labour has also pledged to remove “unjustifiably generous investment allowances”, which companies can use to reduce their tax bill, and to stop issuing licences for new fields in the North Sea, which they say would worsen the climate crisis without ensuring energy security.
The Conservative government, which introduced the windfall tax after the breakout of the Russia-Ukraine conflict in 2022, has pledged to keep the levy until 2028-29 unless prices fall “back to normal” sooner. It also plans to legislate to mandate annual licensing rounds for oil and gas production.
The Scottish National party, which has been losing support to Labour, has said decisions on oil and gas exploration, which are reserved to Westminster, should be taken on a case-by-case basis and be subject to a “robust climate compatibility assessment”.
A group of over 60 climate activists and lobby groups, including Greenpeace and Oxfam, on Thursday called on the next UK government to commit to phasing out oil and gas production while ensuring a “clear and funded” transition for workers.
Labour has previously defended its windfall tax policy. One party official told the Financial Times this month that it was usual for companies to threaten to pull out when faced with higher taxes.