The UK government’s decision to keep the windfall tax on North Sea oil and gas operators could wipe out as much as $20 billion (£15 billion) of potential investment in Britain’s offshore oil and gas output, according to a Wood Mackenzie estimate cited by the Financial Times.
The government last week kept the windfall tax on operators in the Budget, dealing a blow to the industry.
Keeping the Energy Profits Levy (EPL), as the windfall tax is officially known since it was first introduced by a Conservative government at the height of the 2022 energy crisis, would wipe out all non-essential investment in the UK shelf, as it would compete with friendlier tax jurisdictions, according to WoodMac.
The UK has one of the highest tax rates of all major producing basins worldwide. Together with the windfall tax, which the government kept against industry calls for reform, operators are paying a massive 78% overall tax rate.
This has prompted many companies to halt investment in the UK and move to cut workforce numbers.
The latest announcement came from one of the top independent producers, Harbour Energy, which on Monday said it expects to reduce employee numbers by another 100, on top of 600 jobs already eliminated since 2023.
The industry slammed the government’s decision, arguing that the windfall tax will eventually bury the offshore oil and gas industry and threaten Britain’s energy security.
“The future of North Sea energy depends on investment, which won’t come without urgent reform of the windfall tax,” Offshore Energies UK Chief Executive, David Whitehouse, said in a statement.
“The government turned down £50 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,” Whitehouse added.
The Aberdeen & Grampian Chamber of Commerce said it’s “Lights out for North Sea oil and gas as Chancellor keeps windfall tax.”
The Chamber’s chief executive, Russell Borthwick, commented that instead of heeding advice from industry, “the UK Government has instead opted for a cliff-edge end to North Sea production and to tax the industry to death inside five years. Jobs will be lost in their thousands as a direct result of this government’s failure to act.”
By Tsvetana Paraskova for Oilprice.com
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