British Business Minister Kwasi Kwarteng has written to the North Sea oil and gas industry asking it to set out a clear plan to reinvest its profits into British energy projects, the government said.
Energy prices have hit record highs this year and big profits for energy producers have led to repeated calls from the Opposition Labour Party for a windfall tax on producers of North Sea oil and gas to help for people struggling with energy bills.
Earlier this month, the government set out plans to scale up domestic sources of affordable, clean and secure energy and a new licensing round for North Sea oil and gas.
“In return for the U.K. government’s ongoing support for the sector, the Prime Minister, the Chancellor [finance minister] and I want to see a very clear plan from the oil and gas industry to reinvest profits in the North Sea,” Mr. Kwarteng wrote in his letter to the industry.
“At our next meeting in coming weeks, I would like you to set out how you will reinvest profits, double down on investments in the clean energy transition and importantly accelerate and maximize domestic oil and gas production.”
Mr. Kwarteng, speaking about the plans on Sunday, said it remained his view that a windfall tax would obstruct investment, but added that the government almost never ruled out future tax changes, which were up to Finance Minister Rishi Sunak.
Earlier this week Mr. Sunak said he might consider a windfall tax if investment did not rise.
“Frankly, I think they are going to make those investments. Shell have already announced £25-billion of investment and others will do so,” Mr. Kwarteng told the BBC.
“If you are asking a company to invest in North Sea gas … it doesn’t make much sense to me to then hit them with a windfall tax, which is arbitrary and unexpected,” he added.
Power and gas prices for millions of households rose 54 per cent from April when regulator Ofgem increased its cap on the most widely used tariffs after wholesale global gas prices hit record highs.
Since the new cap, Russia’s invasion of Ukraine has driven global gas prices further and Mr. Kwarteng said he could not say how long the high prices would last.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.