Wednesday , March 22 2023

Energy giant ExxonMobil sues EU over windfall tax


BRUSSELS/ LUXEMBOURG: US energy giant ExxonMobil is suing the European Union (EU) in a bid to stop its new windfall tax on oil firms.

A windfall tax is imposed on firms that benefited from something they were not responsible for.

Energy firms are getting much more money for their oil and gas, partly due to supply concerns after Russia’s invasion of Ukraine but Exxon has accused Brussels of exceeding its legal authority, calling the measure “counter-productive”.

ExxonMobil reported a quarterly profit of almost $20 billion (£17.3 billion) in October.

The company, along with other major players in the oil and gas sector, has argued that a crackdown, however, would discourage investment.

In September, European Commission chief Ursula von der Leyen announced an emergency plan for major oil, gas and coal companies to pay a “crisis contribution” on their increased 2022 profits.

A 33% tax on this year’s profits was announced – those profits were more than 20% higher than the average for the three previous years.

Exxon has also argued that the levy undermines investor confidence, in a challenge filed at the EU’s Luxembourg-based General Court.

“Whether we invest here primarily depends on how attractive and globally competitive Europe will be,” Exxon spokesperson Casey Norton told the Reuters news agency.

In an investor meeting earlier this month, ExxonMobil’s chief financial officer estimated that the EU tax would cost the group “over $2 billion”.

The European Commission said it “takes note” of Exxon’s lawsuit.

In a statement on Thursday, its spokeswoman said it would now be up to the General Court to rule on the case.

“The Commission maintains that the measures in question are fully compliant with EU law,” Arianna Podesta said in a statement.

The EU is largely trying to wean itself off Russian energy in the wake of the invasion of Ukraine, but that has left it scrambling for alternative sources.

EU ministers estimate that they can raise €140bn (£123bn) from the levies on non-gas electricity producers and suppliers that are making larger-than-usual profits from current levels of demand.

The government is extending the windfall tax on oil and gas companies operating in the North Sea.

The levy was introduced in May, but will now carry on for longer and at a higher rate.

There had been calls to increase the tax after Shell and BP reported huge profits.

How much money have energy firms been making?

BP made $8.2bn (£7.1bn) worldwide between July and September, which was more than double its profit for the same period in 2021. It had made £6.9bn in the three months to June.

Shell announced worldwide profits of £8.2bn and £9bn for the same three-month periods.

Both companies have increased their dividend payments, which is the money they give directly to shareholders.

And they have been spending billions buying back their own shares from the market, in order to increase their value.

Shell and BP’s profits have been boosted by high oil and gas prices, exacerbated by Russia’s invasion of Ukraine. However, both companies say they have lost a lot of money as a result of stopping investments in Russian oil firms. (Int’l Monitoring Desk)

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