UK higher bills are here to stay, warns energy boss

Equinor – the Norwegian energy giant’s Boss- anticipates that the gas and electricity costs will not return to its pre-Covid stage.

Anders Opedal told BBC that adapting to energy sources that cause lower damage than fossil fuels would indicate a continuous peak in energy costs.

He added that windfall taxes were the focal reason for energy firms’ investment fluctuations in projects across the UK.

Higher gas rates are the root cause of why energy firms have been reporting profits.

So what does windfall tax imply?

While the wholesale rates picked up post the ease in Covid restrictions, the prices surged more after several countries attacked the Kremlin with sanctions and Russia’s invasion of Ukraine.

However, in the past few weeks, in response to Europe’s warmer-than-usual weather, rates for gas went back to their levels before the Russian invasion of Ukraine.

As a result, the gas and electricity costs for businesses and locals seem excessive and stretch the living costs out for many.

One of Europe’s most significant energy firms – Equinor, incurs a majority of its revenue by generating gas and oil through its operations set up in 36 countries, including the UK.

Mr. Opedal thinks it appears uncertain that electricity and gas bills will go back to when a standard UK family paid approximately £1,300 each year. Contrarily, the current standard annual bill for a UK family is approximately £2,500, including the UK government’s aid.

He further said there is “a kind of re-wiring of the whole energy system in Europe particularly after the gas from Russia was taken away.” Mr. Opedal noted that a more considerable investment in renewables seems quintessential, including the usage of more hydrogen.

He said, “This will require a lot of investment and these investments need to be paid for, so I would assume that the energy bills may slightly be higher than in the past but not as volatile and high as we have today.”

Projecting the future, he states that “we need to treat energy as something that is not abundant.”

“I think we have had a lot of cheaper energy in the past and we probably wasted some of it, so we need to make sure we’re making the right investments now [and] everyone [should] use as little energy as possible.”

Mr. Opedal’s interaction with BBC dates before his participation at the World Economic Forum, conducted in Davos, Switzerland, an annual meeting of the political and business heads. This year’s forum was based on the theme “Cooperation in a fragmented world,” arranged from the 16th to 20th Jan.

He participated as Equinor’s president and chief exec in 2020, along with a pledge to be “a force” in the transition to green energy. Mr. Opedal initiated his professional life as a petroleum engineer.

Equinor’s latest financial results, covering the period between July to September, recorded a pre-tax revenue of $24.3bn (£19.8bn), compared to its $9.7bn income for the same period last year.

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The UK introduced the windfall tax last year, impacting energy firms that have profited from the surge in prices.

Starting at 25%, the Energy Profits Levy will increase to 35% this month and will remain intact until March 2028.

However, the tax will only apply to revenue earned from oil and gas extraction in the UK, not to activities that involve refining oil and selling diesel or petrol at petrol stations.

The scheme also allows companies to acquire tax savings of up to 91p per £1 funded in fossil fuels extraction across the UK.

Mr. Opedal said although the tax wasn’t impacting Equinor’s UK investment strategy, “It is affecting how we judge each project because we have to take into account what is the tax level compared to what are all the other risks.”

He used references to the Rosebank oilfield located off Shetland’s coast that Equinor aims at developing post-government approval.

Equinox states that at its best, the field can produce and touch its peak of around 70,000 oil barrels in a day, making for 8% of the UK’s oil production from 2026 to 2030.

But, environmental campaigners identify with these plans as a “total betrayal” towards the global goals of the UK.

Mr. Opedal stated, “There have been two changes in the tax regime already and we’re thinking about will it even be more going forward? Rosebank is a project that we think is needed in the UK in terms of energy security.”

“Uncertainty about what will the tax level be will be an important part of the decision [to go ahead] because, for instance, now on some of the fields we have invested in we are still not profitable but pay tax already based on the windfall taxes. So this is how we kind of evaluate every project,” he further added.

Equinor’s Norwegian operations make up almost two-thirds of its oil and gas business. The latter of its business is outspread in 30 countries, with the Mariner field off Shetland and the Peregrino field in Brazil as two of its most significant production areas that initiated its operations in 2019.

The company has also invested in renewables such as hydroelectric power. In addition, they announced their recent plans to collaborate with RWE in Germany, aiming to erect hydrogen-ready power plants.

Though the plan will run on gas through the initial phase, it will eventually be efficient enough to use hydrogen from renewable energy.

- Published By Team Timeswire

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