The UK government’s plan to further raise the windfall tax on North Sea oil and gas producers will drive investments away from the region while Britain still needs oil and gas for the foreseeable future, the chief executive of Harbour Energy, the largest UKCS producer, told the Financial Times.
The Labour Party, which came to power in the UK after a landslide victory in the July general election, said in July that it intends to raise the rate of the Energy Profits Levy (EPL) to 38% from 1 November 2024, from 35% now, bringing the headline rate of tax on upstream oil and gas activities to 78%, up from 75% currently. The levy will be further extended by a year to 2030.
Harbour Energy’s CEO Linda Cook has criticized the levy ever since it was first introduced by the previous UK government in 2022.
Now Cook told FT that a rise in the windfall tax would lift the barrier to attract investment in the UK even higher.
“The fiscal regime in a lot of the other countries — in all of the other countries — in which we will have a presence will be more attractive” than the UK North Sea, she added.
Earlier this week, UK offshore industry group OEUK warned that not only viable capital investment would be reduced from $18.5 billion (£14.1 billion) to just $3 billion (£2.3 billion) in the period 2025 to 2029, but the tax hike would also lead to $16 billion (£12 billion) lower tax receipts for the country compared to the current tax regime.
Last week, Equinor, the operator of one of the major new field developments in recent years, Rosebank, said it awaits clarity on the UK tax regime by the Labour government before strategizing and committing to investments in the UK North Sea.
As a result of the planned hike in the windfall tax, UK North Sea producers have already warned they are considering moving to more fiscally stable jurisdictions such as Norway.
Neo Energy said this week it was slowing down investment in light of “fiscal and regulatory uncertainty”.
