Energy major ExxonMobil said Dec. 29 that it has launched a legal challenge against the windfall tax imposed by the EU on oil and gas company profits, labelling the measure “counterproductive” and calling for more “thoughtful policy” initiatives.
A spokesperson for the energy major told S&P Global Commodity Insights that its affiliates in the Netherlands and Germany had filed a lawsuit in the European General Court on Dec. 28.
“This tax will undermine investor confidence, discourage investment, and increase reliance on imported energy and fuel products,” ExxonMobil said in a statement.
“European industries already face a very real competitiveness crisis and governments should be supporting the production of reliable and affordable energy… We will continue to work with EU leaders to address these issues. Thoughtful policy is critical,” it added.
The European Council wasn’t immediately available for comment.
Energy crisis
In September, the EU agreed a package of measures to mitigate spiraling energy costs, cut energy demand and claw back excessive revenues from oil and gas companies by imposing windfall taxes.
EU ministers agreed a “solidarity contribution” on excess profits generated from activities in the oil, gas, coal and refinery sectors.
Under the proposal, a levy will be collected on 2022 energy company profits that are at least 20% above the average profits of the previous three years, charged at a rate of at least 33%.
The tax could bring in Eur25 billion ($26.62 billion) in public revenues, the EC estimates.
In its statement, ExxonMobil said it is working on increasing energy supplies to Europe due to the energy crisis, which is weighing heavily on families and businesses.
“Looking forward, as we consider future multi-billion euro investments in Europe’s energy supply and transition, we look for strong business cases underpinned by a stable and predictable investment climate,” it added. “Whether we invest here primarily depends on how attractive and globally competitive Europe will be.”
ExxonMobil said it has been one of the largest investors in European refining over the last 10 years, investing more than $3 billion in major refinery projects.
“The expansions and improvements in Antwerp and Rotterdam have helped us achieve our best global production rates since 2008. We’re delivering more energy products at a time when Europe struggles to reduce its energy imports from Russia,” it added.
Many oil and gas companies have criticized windfall taxes as a policy, saying they do not help in bringing consumer costs down.
The world’s key physical crude benchmark, Dated Brent has averaged $101.47/b so far this year, according to the Platts assessment from S&P Global, compared with $70.91/b in 2021.wind
Texas-headquartered ExxonMobil has operations in 16 European countries.
For the third quarter of 2022, it reported earnings of $19.7 billion, representing $4.68/share, up from $6.75 billion or $1.57/share in the same period of 2021.
It released a broad outline of its 2023 corporate plan Dec. 8, as well as goals for the next five years, saying it plans $23 billion to $25 billion of capital spending next year, up 9% on the year, and plans to keep production steady at 3.7 million b/d of oil equivalent, assuming Brent oil prices are at least $60/b.