Harbor Energy to shed 350 onshore UK jobs, blames windfall tax

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photo caption,

The vast majority of Harbor Energy’s UK employees are based in Aberdeen

The UK’s largest oil and gas producer has told employees it expects to shed 350 UK jobs, blaming a surprise UK government tax.

Harbor Energy has been conducting a review of its operations since January, after warning it was re-evaluating its future UK business.

The vast majority of its 1,200 UK onshore employees are based in Aberdeen.

A statement from the company said it was working hard to mitigate the impact of the workforce cut.

The statement said: “When we announced the review we said that as a result of an energy dividend tax resulting in an effective tax rate of 75% in the UK regardless of the level of oil and gas prices in the market or achieved, we had to reassess our future level of activity in the UK.” .

“In our full-year results in March, we made it clear that this would result in a significant reduction in our workforce in the UK.”

“We are working hard to mitigate the impact of this reduction, for example, by freezing recruitment and opening up a voluntary redundancy scheme. These figures do not include UK firms and international roles, which are still under review.

“It also does not include our external organization, where we expect the impact to be much less. We are fully aware of the impact of this news on our staff, and we are conducting the review fairly and considerate of everyone affected.”

image source, Harbor Energy

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Harbor Energy is the UK’s largest oil and gas producer

Her Majesty’s Treasury said: “Levy Energy Dividends balances the cost of financing a living support from excess profits while encouraging investment towards strengthening UK energy security.

“We have made it clear that we want to encourage the reinvestment of sector profits to support our economy, jobs and energy security, which is why the more investment a company makes in the UK, the less tax they will pay.”

“Tip of the iceberg”

Blaming the windfall profits tax for job cuts was “further evidence that the oil and gas industry continues to prioritize company profits over the needs of workers and communities”, said Freya Aitchison of Friends of the Earth Scotland.

“To provide workers with a truly secure future, we need to see government actions that provide a quick and just transition away from volatile oil and gas to decent green jobs in renewable industry,” she said.

Ryan Crichton, policy director for Aberdeen and the Grampian Chamber of Commerce (AGCC), said the organization’s thoughts were with people who would be out of work – and warned it could become “the tip of a terrifying iceberg” for north-east Scotland.

How does the unexpected tax work?

Energy company profits have been rising recently, first because of increased demand after the lifting of Covid restrictions, and then because of the Russian invasion of Ukraine that raised energy prices.

In the fall, current chancellor Jeremy Hunt announced it would rise to 35% from January 2023, running until March 2028. It was previously scheduled to end at the end of 2025.

The tax applies to profits made from oil and gas extraction in the UK, but not from other activities – such as oil refining and the sale of petrol and diesel in outfields.

Harbor Energy has recorded a pre-tax profit of $2.5bn (£2.1bn) for 2024.

However, taxes—including the $1.5 billion earmarked for Levi’s energy dividends—contributed to the company reporting just $8 million in after-tax earnings.

reduced debt

In its previous annual results, Harbor said it “achieved materially higher production” and improved margins in 2024.

It added at the time: “For Harbor, the UK’s largest oil and gas producer, it has all but wiped out our profit for the year. This has prompted us to reduce our UK investment and staffing levels.

“Given the country’s financial instability and investment outlook, it has also strengthened our strategic objective of international growth and diversification.”

In 2024, the company reduced its net debt, excluding certain fees, from $2.3 billion to $0.8 billion.

Harbor distributed $553 million to shareholders, while the company proposed a $100 million final dividend.

A new $200 million share buyback plan was also revealed.