The UK Government’s decision to impose a windfall tax on industry is disappointing and presents challenges to a sector that is focussed on meeting the UK’s energy needs for decades to come.
The tax, labelled as The Energy Profits Levy, puts an additional 25% tax on UK oil and gas profits on top of the existing 40% headline rate of tax, taking the combined rate of taxation to 65%.
The UK Continental Shelf is in competition with basins around the world for this investment and relies on companies having fiscal predictability for projects worth billions of pounds, which take years to bring on stream and can be in operation over decades.
But the decision has been made, so it’s now crucial that this levy remains a simple, time-bound one-off event instead of an ongoing feature of the fiscal regime. The need for joint working has never been more critical, and with our members, OEUK will continue to work with government to understand how we can mitigate any unintended consequences of this levy and address the concerns of investors.
We are a sector committed to making a positive contribution to the country’s energy security and net zero ambitions, this can only be achieved if we can offer a stable platform for investment.
As the global energy crisis continues, amplified by the tragic events in Ukraine, governments around the world are starting to wake up to the idea of maximising their own energy potential and minimising their reliance on other countries for imports.
This is something the UK has recognised for a long time and put into action almost a year and a half ago through the North Sea Transition Deal, in partnership with the UK Government.
It’s a plan that’s good for jobs, our energy security, and our homegrown energy transition, but it requires a lot of joint effort to succeed.
The Office for Budget Responsibility has costed the decarbonisation of the UK at staggering £1.4 trillion by 2050, with £1 trillion coming from private investors. These are investors that think, and fund, in terms of years and often decades.
We understand that this is a difficult time for millions of households across the UK. However, the levy itself is not a long-term solution. The clearest path towards greater stability is through supporting homegrown energies, encouraging investment in all forms of energy offshore to encourage energy security.
We need energy companies, investors, energy leaders and governments to work together to ensure the levy does not lead to capital flight with investments, formerly heading to the UK, being diverted to the likes of Norway, the Americas and Middle East.
Clarity and certainty over government support for its energy security strategy will help ensure that wind, hydrogen, and carbon capture can be realised at scale here in UK waters whilst we continue to invest in the oil and gas we will need for decades to come.
Our request of politicians and policy makers is that they truly put energy policy in a broader context and rise above the calls of the election timetable, to deliver long-term enduring solutions, rebuilding trust with a sector that is uniquely positioned to unlock the energy transition, forming a future the UK can be proud of.
