Industry body Offshore Energies UK (OEUK) said the UK government Budget “delivers [a] bitter blow to [the] UK’s energy workers and industry”, in a statement sent to Rigzone on Wednesday.
In that statement, OEUK “condemned the government’s decision in today’s [Wednesday] Budget to reject replacement of the Energy Profits Levy (EPL) in 2026”, dubbing it “a move that will cost tens of thousands of jobs, cripple investment, and undermine Scotland and the UK’s energy security”.
OEUK revealed in the statement that it will meet its 450 member companies “for urgent talks”. The industry body noted that it is also seeking an immediate meeting with UK Chancellor of the Exchequer Rachel Reeves “to explore every option to reverse this policy and prevent further economic and industrial damage”.
OEUK Chief Executive David Whitehouse said in the statement, “today, the government turned down GBP 50 billion [$66 billion] of investment for the UK and the chance to protect the jobs and industries that keep this country running”.
“Instead, they’ve chosen a path that will see 1,000 jobs continue to be lost every month, more energy imports, and a contagion across supply chains and our industrial heartlands,” he added.
“This is not over. We will keep pressing for change – this industry’s people, their communities, and the value of this strategic national asset are too important to dismiss. The government was warned of the dangers of inaction – they must now own the consequences and reconsider,” he continued.
Whitehouse warned in the statement that the future of North Sea energy depends on investment, which he said won’t come without urgent reform of the windfall tax.
“If the levy stays in place beyond 2026, projects will stall and jobs will vanish, no matter how pragmatic licensing policy becomes. Fixing this outdated tax is the key to unlocking billions in investment across the UK’s entire energy mix,” he added.
“Waiting four years for reform of this tax is too late. The North Sea continues to be one of the least competitive places for our industry in the world,” he continued.
“We put forward a pragmatic plan: a reformed, permanent windfall tax in exchange for billions in UK investment, more tax paid, and jobs sustained. Government said no,” Whitehouse went on to state.
In the statement, OEUK highlighted that the government acknowledges the UK needs oil and gas for decades to come. It noted that, as renewables roll out, 75 percent of the UK’s energy still comes from oil and gas and that 10-15 billion barrels are required by 2050.
“OEUK has shown how half of this amount could be produced at home with tax reform in tandem with a pragmatic approach to licensing,” the industry body pointed out in the statement.
“Otherwise imports will continue to rise as jobs, projects, and investment move overseas,” it added.
OEUK said in the statement that it is reviewing “both the full detail of the Budget and the government’s latest guidance on licensing, and the Future of the North Sea consultation outcome, announced today”, adding that OEUK “has consistently advocated for a pragmatic outcome on licensing”.
The industry body pointed out that no new exploration wells have been drilled in 2025 and warned that domestic oil and gas production has fallen by 40 percent in the last five years “and is on course to halve again by 2030”.
“This is an accelerated decline driven by government policy, not geology,” OEUK said.
Rigzone has contacted the UK Department for Energy Security and Net Zero (DESNZ) and HM Treasury (HMT) for comment on OEUK’s statement. At the time of writing, neither have responded to Rigzone.
A Budget 2025 policy paper posted on the UK government website on November 26 stated that the government “is providing long-term fiscal and regulatory certainty to the oil and gas sector and its investors by confirming the details of a permanent mechanism to respond to oil and gas price shocks when the Energy Profits Levy (EPL) ends”.
“The government has also published the North Sea Future Plan. The Plan sets out the action the government is taking to support ongoing investment and opportunities in oil and gas, ensuring a fair, orderly and prosperous transition in the North Sea,” it added.
“The government is delivering on its commitments to cease issuing new oil and gas licenses to explore new fields, while ensuring existing fields can be managed for their full lifespan, including by introducing Transitional Energy Certificates. The Plan establishes a new North Sea Jobs Service, offering tailored end‑to‑end support for the current workforce,” it continued.
The Budget paper went on to state that a new Oil and Gas Price Mechanism (OGPM) will act as a windfall tax “to deliver a fair return to the nation when oil and gas prices are unusually high”.
“The mechanism will be revenue-based and apply an additional tax rate of 35 percent above price thresholds of $90/barrel for oil and 90p/therm for gas. Current price forecasts suggest that oil and gas prices are expected to be close to triggering the Energy Security Investment Mechanism (ESIM) price floor within the next few years,” it noted.
“If average oil and gas prices fall under the ESIM thresholds, the Energy Profits Levy (EPL) will end immediately and the new OGPM will come into effect, returning the tax rate to the 40 percent headline rate in the permanent regime, with the OGPM only applying when prices are unusually high,” it stated.
If the ESIM is not triggered, the EPL will end by March 2030 and will be replaced by the OGPM, according to the paper.
“To provide certainty and ensure readiness should prices fall and the EPL end earlier, the government intends to legislate for the OGPM in the next Finance Bill (2026-27),” the paper noted.
“The government will commence engagement immediately after the Budget on the draft legislation and implementation, to ensure the regime is ready to operate if required, and to consider the potential impacts of an early end to the EPL due to falling prices,” it added.
“These measures will support growth, oil and gas workers, supply chains and communities, recognizing the important role that oil and gas will continue to play in the UK’s energy mix for decades to come,” it continued.
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