Vitol urged UK government for increased liquidity amid energy crisis

During last year’s energy crisis, Vitol, the giant commodity trader, reportedly urged the UK government to increase liquidity in the market. Vitol’s CEO, Russell Hardy, suggested that government intervention could incentivize sellers to return to the market, thereby stabilizing prices.

However, Hardy clarified that Vitol did not lobby for government action and emphasized that any intervention would ultimately benefit customers. Bloomberg obtained this information from the minutes under the Freedom of Information Act.

In November, the UK government intervened by announcing plans to increase the windfall tax on oil and gas producers’ profits to 35%, up from the previous rate of 25%.

This new rate took effect from 1st January 2023 until March 2028, as part of a series of budgetary measures aimed at addressing the cost of living crisis and strengthening the country’s finances.

UK oil and gas companies typically face a higher tax rate of 40% on their continental shelf operations, compared to the 19% corporate profit tax rate for companies in other sectors.

With the new levy in place, companies like BP and Shell Plc. (NYSE: SHEL) will now pay 75% in taxes, an increase from the 65% paid in 2022.

Despite the crisis, Vitol and other major energy traders profited significantly, with Vitol achieving a record $15 billion in profit, largely attributed to high commodity prices.

In FY 2022, British energy giant BP Plc (NYSE: BP) reported annual profits of almost $28 billion, surpassing the previous year’s earnings and becoming the largest profit in the company’s 114-year history.

This remarkable achievement comes despite a significant post-tax charge of $24.4 billion in its 1Q 2022 results, the most substantial impact on any company globally, incurred when BP exited its 19.75% stake in Russia’s Rosneft PJSC.

Last year, Centrica Plc (OTCPK: CPYYF, OTCPK: CPYYY), the owner of British Gas, witnessed its FY 2022 profits triple to a record 3.3 billion pounds.

This surge in earnings was primarily driven by soaring profits in its upstream oil and gas division, benefiting from the unprecedented high energy prices, with wholesale gas prices reaching record highs in the country.

Last year, Centrica, holding a 20% stake in Britain’s nuclear power stations, experienced a boost in profits due to increased generation.

In response to its financial performance, Centrica announced an expansion of its share buyback program to £300 million from £250 million, indicating the company’s intention to repurchase 10% of its capital.

According to Citi analyst Jenny Ping, Centrica shares have been given a Buy rating, citing the company’s robust cash generation, strong balance sheet, and significant share buyback program.

In August of the previous year, Centrica inked a 15-year supply agreement worth £7 billion ($8.45 billion) with Delfin Midstream for liquefied natural gas sourced from a proposed LNG export facility located off the coast of Louisiana.



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By Ryan

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