The Offshore Energies UK (OEUK) has issued a warning that the British government's proposed changes to the windfall tax on North Sea oil and gas producers could lead to a significant revenue loss of nearly £12 billion ($16 billion) between 2025 and 2029. This announcement comes amid the Labour government’s efforts to transition from fossil fuels to renewable energy to combat climate change.

The proposed changes, which include an increase in the Energy Profits Levy (EPL) from 35% to 38% starting November 1st, and the removal of the levy’s 29% investment allowance, are expected to accelerate the decline of the UK’s domestic oil and gas production. The OEUK predicts that capital investment in the sector will drop from £14 billion to just £2.3 billion over the period.

David Whitehouse, CEO of OEUK, emphasized that these tax changes will not only reduce the taxes paid and jobs supported by the industry but also diminish the broader economic value generated by the sector. NEO Energy, which operates in the UK North Sea, echoed these concerns, citing fiscal and regulatory uncertainty as major deterrents to future investments.

Production in the North Sea has already declined significantly, from 4.4 million barrels of oil equivalent per day (boed) at its peak to approximately 1.3 million boed today. The North Sea Transition Authority (NSTA) forecasts this will further drop to less than 200,000 boed by 2050.

The Treasury has stated its commitment to maintaining a dialogue with the oil and gas sector to ensure a phased and responsible transition for the North Sea.

Source: reuters.com