The North Sea oil and gas industry is pressing the UK government to terminate the windfall tax on fossil fuel companies by 2027, three years ahead of schedule, to stimulate investment in the sector. Offshore Energies UK (OEUK), the trade body representing the industry, suggests replacing the current Energy Profits Levy with a more targeted tax regime that activates only when oil and gas prices exceed a certain threshold.
The Energy Profits Levy was initially introduced in 2022 after a surge in energy prices led to significant profits for oil and gas companies, largely attributed to geopolitical tensions following Russia’s invasion of Ukraine. Under the OEUK’s proposal, a 35% levy would be applied to revenues only during periods of elevated prices, aiming to balance higher taxation with incentives for investment.
David Whitehouse, chief executive of OEUK, argues that the proposed approach would maintain necessary taxation during profitable times while encouraging investments that could inject up to £50 billion into the North Sea and bolster industrial employment. The organization also projects that advancing the tax change could yield up to £14.9 billion in additional tax revenues over the next decade, factoring in the economic activity generated by new investments.
Moreover, OEUK is advocating for the approval of the Rosebank and Jackdaw oil and gas projects, asserting that increased domestic production could lessen the UK’s dependency on imported natural gas. However, this stance faces opposition from environmental groups, such as Greenpeace, which call on the government to reinforce rather than relax the windfall tax. These groups contend that oil and gas companies should contribute more towards alleviating high living costs and energy prices for households.