Rishi Sunak will embark on a charm offensive with the oil and gas industry during a visit to Aberdeen on Thursday as he attempts to heal the rift caused by his windfall tax. The chancellor will meet executives from the sector in the Granite City, the home of the British oil industry, days after draft legislation for the Energy Profits Levy (EPL) was published. Sunak last month unveiled the levy, which he hopes will raise £5bn by increasing taxes on the profits of oil and gas producers in the North Sea to fund support for households struggling with the cost of living crisis. Energy companies have seen profits boom as a squeeze on oil and gas supplies, exacerbated by Russia’s invasion of Ukraine, pushed up revenues. The debate over whether to implement the levy split the cabinet and has faced opposition from the energy industry. Companies argue that the levy will damage investment into domestic green energy sources. One industry executive, who will be attending the meeting, said: “There is a lot of anger about the windfall tax. If Rishi thinks he can take his jacket off, roll up his sleeves and shake hands he might be in for a rude awakening.” The levy includes an investment allowance which gives companies 91p in tax savings for every £1 spent on investment. Energy companies have until 28 June to respond to the consultation on the levy. It is understood they are hopeful they may be able to convince the government to backdate the investment allowance to the start of the year, rather than late May.
Energy firms also hope to convince the government to review a sunset clause on the legislation which will see the levy dropped when market conditions return to normal or by the end of 2025. The North Sea’s biggest players including representatives of BP, Shell and Harbour Energy are expected to attend the meeting. The Guardian revealed this week that Harbour had labelled the windfall tax “seriously flawed” in a letter to Sunak. Sunak also intends to discuss Britain’s energy security as the UK and Europe scramble to shore up energy supplies amid the fallout of the war in Ukraine. Ahead of the meeting, Sunak said: “It’s vital we encourage continued investment by the oil and gas industry in the North Sea and our new investment allowance provides huge tax reliefs for projects that cut emissions.”