The forecast for tax revenue the UK Treasury will take from oil and gas in the future has been slashed by the Office for Budget Responsibility (OBR).
North Sea receipts to the Exchequer will be just £200million in 2024-25, according to the budget watchdog.
That figure is down 80% on the same projection in March last year, when the OBR expected oil and gas revenues to be £1billion by 2024-25.
“Our forecast for oil and gas revenues have been revised down substantially since November, and more so since last March”, the OBR said, consisting of offshore corporation tax and petroleum revenue tax (PRT).
Offshore corporation tax is down by around half a billion pounds per year on average, relative to previous projections, with receipts now expected to be just £0.3 billion this year and £0.2 billion in 2025-26.
Former Chancellor George Osbourne announced sweeping changes to the North Sea regime five years ago to help it through the last downturn, which he said effectively “abolished” PRT.
The OBR’s downward revisions reflect lower production forecasts based on Oil and Gas Authority (OGA) projections, with an increased oil price in recent months “partly offsetting” that.
The North Sea brought in £300million to the Exchequer in 2020-21, down £100m on last year’s prediction, and is expected to bring £600million in receipts in 2021-22.
However, that’s expected to taper down gradually to £200m in 2024 and 2025.
The move comes as the industry grapples with Covid-19 impacting production and the energy transition.
The OBR released its projections after Chancellor Rishi Sunak gave his Budget statement on Wednesday.
Offshore Wind
Within that, he confirmed a previously trailed package of more than £30million for the Aberdeen sector, the majority of which will go to Energy Transition Zone proposed by Sir Ian Wood.
Cash will also go to an underwater engineering hub, as well as £2million to help the industry “further develop proposals” for a North Sea Transition Deal.
Earlier the RMT union called for changes to the Royal Family’s Sovereign Grant in order to fund an annual “Just Transition Fund” of £220m.
Mr Sunak announced a number of offshore wind initiatives, including a £20m fund to support development of floating wind tech across the UK.
The Chancellor also announced plans for offshore wind port infrastructure at Humber and Teesside.
RenewableUK CEO Hugh McNeal described it as a “big bang” moment for the sector, “which will drive investment in a globally competitive domestic supply chain”.
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