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TotalEnergies cuts North Sea investment over UK windfall tax

French company TotalEnergies will cut North Sea oil and gas investment by 25 percent next year after the UK government extended a windfall tax on energy firms.

Jean-Luc Guiziou, head of the company’s UK production operations, has said that “following another change to the fiscal environment for energy investors in the UK, we are now evaluating the impact of this change on our current and planned projects”.

“For 2023 alone, our investments will be cut by 25 percent,” he added in a statement reported by specialist publication Energy Voice on Thursday.

TotalEnergies confirmed the statement to AFP Friday.

Total will cut its North Sea investment by £100 million ($123 million) in 2023, impacting work on new wells, after finance minister Jeremy Hunt ramped up a windfall tax on oil and gas giants, whose profits have surged on fallout from the Ukraine war.

Prime Minister Rishi Sunak’s spokesman on Friday said “it’s right and fair that those with the broadest shoulders, and who are able to, contribute the most so we can continue to support the vulnerable”.

The tax extension in last month’s budget was aimed at helping fund support for British consumers hit by rocketing energy bills.

The government wants the energy sector to partly foot the bill as it tries to shore up the nation’s public finances, hit by a combination of UK political turmoil, pandemic support and Brexit fallout.

The windfall tax “is in line with other European countries” such as Italy, Sunak’s spokesman added.

Guiziou this week said that a “competitive and stable fiscal and regulatory regime is vital to investment in critical energy and infrastructure projects that will support the UK’s security of supply and net zero ambitions”.

Energy giants, including also BP and Shell, will face an exceptional tax on profits of 35 percent, up from 25 percent and lasting an additional three years to 2028, Hunt announced.

Guiziou added “that the government should remain open to reviewing the energy profits levy if prices reduce before 2028”.

Before its extension, the windfall tax was introduced earlier in the year when Sunak had been finance minister.