Shares of UK North Sea oil firms slump after Labour election pledge

By Ron Bousso

LONDON (Reuters) - Shares of British North Sea oil producers fell sharply on Thursday after the opposition Labour party outlined plans to raise taxes on oil and gas, and halt new exploration licences, ahead of next month's general election.

Labour commands a clear lead in polls over the ruling Conservative party ahead of the July 4 vote. The party said in its manifesto that it will increase by 3 percentage points a windfall tax first imposed in 2022 after energy prices spiked following Russia's invasion of Ukraine.

It also vowed to scrap the so-called investment allowance, which exempts most profits that are re-invested in oil and gas production.

Although the proposals were expected, shares of North Sea oil producers fell sharply on Thursday.

Shares of Harbour Energy, the largest producer in the basin, fell 3.8% by 1330 GMT, while shares of Serica Energy and Enquest dropped around 8% each. Shares of Ithaca Energy were down 3.3%.

The current 35% windfall tax, which will run until 2029, brings the total tax burden on producers to 75%, among the highest in the world.

The levy wiped out most profits for producers last year and many, including Harbour Energy, pared back investments and cut hundreds of jobs. Many of the producers are now looking to acquire assets beyond the North Sea.

Industry body Offshore Energies UK (OEUK) said on Thursday it was concerned over the plans to scrap new oil and gas licences.

"We are explaining to all parties that we need the churn of new licences for a successful homegrown energy transition, to safeguard jobs and our energy security and create the investment conditions firms need to stay here in the UK."

"We also need a globally competitive tax framework based on fair returns; windfall taxes undermine this. Labour has big ambitions and we need an investment environment to match," OEUK said in a statement.

(Reporting by Ron Bousso; Editing by Shinjini Ganguli)