NORTH Sea workers look set to pay the price for oil firms’ fury over the windfall tax even as investors are in line for more big payouts.

The threat of widespread job losses was raised after a leading North Sea player, Harbour Energy, said it would make staffing cuts in response to the decision the Chancellor made in November to increase the rate of the Energy Profits Levy.

This was introduced in May as oil and gas firms such enjoyed a massive boost to their profitability amid the surge in oil and gas prices fuelled by Russia’s war on Ukraine. Windfall tax receipts will help the Government fund measures to limit the huge increases in energy bills that consumers were left facing.

Harbour said the cuts would affect staff in its Aberdeen base without specifying how many would be involved.

“Following changes to the EPL, we have had to reassess our future activity levels in the UK … As such we have initiated a review of our UK organisation to align with lower future activity levels,” the company told Reuters.

The move followed the announcement by Harbour in December that it would not apply for licences in the latest North Sea exploration licensing round.

Harbour’s cutbacks will reinforce industry leaders’ claims that the windfall tax could prompt firms to make big cuts in North Sea spending and look to shift investment elsewhere.

However, some will wonder why workers should pay the price for firms’ unhappiness about the tax at a time when companies such as Harbour still expect to make huge amounts of money in the area.

Harbour declares on its website: “Our strong balance sheet and cash-generative UK business provides us with the financial flexibility to fund international growth and shareholder returns.”

Days after making its announcement about jobs Harbour said it grew underlying earnings to around $4.1 billion last year, from $2.4bn. The windfall tax bill for 2022 is expected to be around $350m.

In the trading update concerned, Harbour said it expects to produce oil at an average $16 per barrel this year, helped by efforts made last year to cut costs following the acquisition of Premier Oil in 2021.

Harbour produces around 200,000 barrels oil equivalent daily. If Brent crude continues to sell for around $85 per barrel it will be in line for another bumper year. Analysts reckon the reopening of the Chinese economy following the relaxation of Covid curbs could see Brent rise above $100/bbl this year.

While Harbour staff fear for their jobs shareholders can look forward to more hefty payouts, after netting $600m from dividends and share buybacks last year.

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Shareholders include US private equity investors that supported Harbour’s push for growth in the North Sea amid the last downturn.

The outlook bullet points in Harbour’s trading update include the following:

“Continue to forecast to be net debt free in 2023. Flexibility over future capital allocation retained, including for meaningful acquisitions and additional shareholder returns over and above our stated $200 million annual dividend.”

Harbour also made clear that it will continue to invest in North Sea projects that meet the kind of return targets it sets. The company said it expects to spend around $850m this year with a focus on “high return, lower risk, infrastructure-led investment opportunities”. This will include developing resources that lie close to existing assets such as the Tolmount gas field.

It’s worth remembering that the Chancellor sweetened the windfall tax pill by introducing a generous investment allowance. This means that firms can save 91p tax for every pound they spend.

Another firm that was vocal in its criticism of the windfall tax provided further evidence that it may not have much if any impact on the amounts paid to shareholders.

After the increase in the tax rate was announced, TotalEnergies said it would cut North Sea investment by £100m this year.

In a trading update issued this month, the French energy giant said the cost of the UK windfall tax for last year would total around $1bn.

However, the company said it expected to pay more, $1.1bn, in respect of the windfall tax that was introduced by the EU. This provided a reminder that the UK was not alone in feeling that oil and gas firms should be expected to share the rewards of the exceptional boost to profitability they had enjoyed.

TotalEnergies also confirmed that it would maintain the pace of its share buyback programme putting investors in line to receive $2bn in the current quarter alone.

Meanwhile the company has signalled that it still sees growth potential in its North Sea portfolio, which it was rationalising before the windfall tax was announced.

In January last year the company sold a stake in the giant Greater Laggan Area (GLA) gas development West of Shetland to Kistos Holdings, which is run by seasoned North Sea deal-maker Andrew Austin.

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Mr Austin launched Kistos after growing RockRose Energy into a £250m North Sea business by acquiring assets that big fish appeared to lose interest in during the last downturn.

In a trading update issued this month, Mr Austin said: “Since Kistos completed the acquisition of a 20% working interest in the GLA … the asset has continued to perform well.”

He also said that Total Energies has confirmed that it will drill a well to target the bumper Benriach gas prospect with Kistos in coming months. It is thought Benriach could contain more than 100 million barrels oil equivalent.

Mr Austin said Kistos and TotalEnergies expect to decide later this year whether to develop the Glendronach find, amid efforts to cut the related costs.

He complained that the windfall tax moves in the UK and Europe had created complications for Kistos, which produces gas in the Netherlands.

However, Mr Austin appears confident that Kistos can prosper in the North Sea under current conditions and suggested the tax changes could create opportunities for Kistos. At RockRose the former investment banker showed his ability to capitalise on moves made by others to reduce their exposure to the North Sea.

“Kistos expects to continue to invest in its existing asset portfolio to maximise recovery at these high commodity prices and utilise the EPL investment allowance where possible,” said Mr Austin in the trading update.”

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Kistos will “continue to actively look for value accretive acquisitions in the North Sea and Europe”.

Mr Austin made clear that he will keep shareholder interests front and centre.

“If we cannot identify worthwhile transactions to pursue, we will consider returning cash to shareholders during this year,” he said.