Neptune Energy could shift investments away from the Netherlands if they cannot be offset against a new windfall tax the Dutch government plans to impose in response to soaring energy prices, the oil and gas producer warned on Thursday.
Neptune, the largest offshore gas producer in the Dutch North Sea, says it intends to invest around $1 billion in the Netherlands over the next five years and that an additional $1 billion is available for re-purposing offshore infrastructure to support carbon capture and storage, and hydrogen production.
As part of an EU-wide effort to shield households and businesses from towering energy bills, the Dutch government has proposed a temporary increase in sales tax to a flat rate of 65% for gas sold above 50 cents per cubic meter for 2023 and 2024.
In addition, it plans to levy an additional windfall tax on oil and gas profits retroactively from Jan. 1, 2022. Neptune called on the Dutch government "to introduce an investment allowance" and added that if the current taxation plans go ahead unchanged it will shift capital to countries where it can make a better return on investment.
"If suddenly we are taxed at more than 100% effective tax rate, and we do not have an investment allowance coming through, we will basically allocate the resources to other projects in other countries, and therefore, you know, you start producing less in the Netherlands," finance chief Armand Lumens told Reuters.
Britain introduced a 25% windfall tax on North Sea oil and gas producers in May, but every 91 pence in the pound of the tax can be offset with future investment in oil and gas.
While Neptune said it supported higher taxes to ease the burden for some, it hoped the Netherlands would consider a model like Britain or Norway, where tax deductions are allowed in the sector.
Neptune said it had the backing of other North Sea producers and had discussed the idea of an investment allowance with the Dutch government. A Dutch economy ministry spokesperson said oil and gas producers had "been invited to come up with an alternative proposal for the levies for 2023 and 2024, on the condition that the same amount is collected as with the intended increase in excise duty."
The Netherlands, like many other European countries, is scrambling to replace Russian gas with alternative sources after the invasion of Ukraine. There are untapped reserves in the North Sea which Neptune could help bring to market.
(Reuters - Reporting by Anthony Deutsch / Editing by Mark Potter)