A group of North Sea firms is urging the UK Government to drop the curtain on the windfall tax ahead of the current schedule.
The head of BRINDEX – a group of over 20 independent operators – says it is “positive” that ministers have heeded industry concerns and introduced a price floor to the energy profits levy (EPL).
But Robin Allan is pushing Westminster to go further in order to fix some of the existing “serious problems” that are impacting jobs and investment in the North Sea.
As well as calling for the EPL to be scrapped before March 2028, the date it’s currently due to expire, he wants the price floor mechanism to take effect if either “oil or gas” drops below the required level, rather than both.
Doing so would help to “protect the UK’s smaller, independent exploration and production companies”, said Mr Allan, chairman of BRINDEX (Association of British Independent Exploration Companies).
A modest breakthrough for industry
After months of lobbying by the oil and gas industry, government announced on Friday that the EPL would dissolve if oil and gas prices dropped below a certain level – $71.40 per barrel for oil and £0.54 per therm for gas for two consecutive quarters.
Since the escalation of the policy in November, the North Sea industry has been taxed at 75% of profits, 35% of which is “windfall”.
Industry has frequently flagged the impact the windfall tax is having on firm’s ability to source capital, at a time when they are meant to be boosting energy supplies.
While the announcement of a price floor is of some conciliation, there are still calls for it to be dropped altogether, and oil and gas projections show the relief may never actually kick in.
‘Serious problems remain’
Mr Allan said: “The UK’s oil and gas sector is clear: the untenable energy profits levy is harming jobs and investment in the North Sea. It is positive that the UK government has begun to address these concerns; however, serious problems remain after today’s announcement.
“The March 2028 end date for the EPL is simply too far away. If the government is serious about energy independence, the current anti-investment taxation environment cannot continue to hamper the UK’s independent North Sea oil and gas companies: the backbone of this country’s energy supply.
© Shutterstock“BRINDEX is calling for the price floor to be lowered before March 2028. In addition, the removal of the EPL should require either the oil or gas price to fall beneath the floor price, not both. This will protect the UK’s smaller, independent exploration and production companies.
“We look forward to working collaboratively with HMT to ensure that Energy Security Investment Mechanism is implemented in a way which truly protects investment and jobs in our industry.”
BRINDEX features some of the North Sea’s biggest hitters, including Harbour Energy, Ithaca Energy, NEO Energy, and EnQuest.
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