The UK government needs to replace the current windfall tax on North Sea oil and gas operations as soon as practically possible and not wait until the sunset clause of the tax regime expires in 2030, says the North Sea Transition Taskforce, backed by the British Chambers of Commerce.
The UK’s Energy Profits Levy (EPL), as the windfall tax is officially known, will remain in place until 2030, the government said early this month as it launched a consultation on what type of tax regime should come next.
Since the tax was initially introduced by the Conservative government at the height of the energy crisis in 2022, oil and gas companies operating in the UK North Sea have been calling for certainty in the regulatory and tax framework. Recent changes in policies and the rising taxes have driven away operators, who say that a lack of North Sea investments would only make the UK more dependent on oil and gas imports.
Now the North Sea Transition Taskforce – which brings together representatives from supply chain, academia, environmental groups, and trade unions – says that if there is a broad consensus for a change and for thresholds set out a reasonable rate, “there is no rational reason why the Treasury should delay until 2030 the replacement of the flawed EPL.”
“Central to this should be a replacement of the Energy Profits Levy as soon as is practicable by a new regime that is proportionate and adjustable in predictable ways in response to changes in the price of oil and gas,” the taskforce said in the report.
“Waiting until the sunset clause expires in 2030, as suggested by the HMT consultation, is to wait too long. Though the intent of the consultation appears to be positive, HMT should recognise that the current tax puts the industry in the UK at a competitive disadvantage and is throttling investment.”
The UK windfall tax has made it impossible for companies to invest, Brian Gilvary, the chairman of Ineos Energy, said in December.
In November, U.S. oil producer Apache said that it plans to cease oil production at its assets in the UK North Sea by 2030 due to the windfall tax on operators.
Philip Rycroft, chair of the taskforce, told the Financial Times, commenting on the report, “Speed is of essence here — good businesses are already voting with their feet.”
By Tsvetana Paraskova for Oilprice.com
