A leading offshore energy trade body says today marks a “difficult day” for the oil and gas sector as the Chancellor confirmed tax rises for North Sea firms.
Delivering her budget on Wednesday, Rachel Reeves announced the windfall tax on North Sea producers will increase from 35% to 38% and extended it a year to March 2030.
This will bring the headline rate of tax paid by operators to 78%.
The levy’s 29% investment allowance, which allows companies to offset tax from capital that is re-invested, will also be scrapped, Ms Reeves confirmed.
However, the government is maintaining the 100% first year allowances and decarbonisation allowances.
‘Difficult day’
David Whitehouse, Offshore Energies UK chief, said confirmation of the tax plans – at a time when oil and gas prices have fallen – represent a “difficult day for the sector”.
There have been widespread warnings an increase to the energy profits levy could risk tens of thousands of jobs and hamper investment.
He added: “Oil and gas companies, our world class supply chain and our highly skilled people will support the energy transition. We will not be successful without them.”
Speaking to the P&J, Mike Tholen, OEUK’s sustainability and policy director, said while the sector does not enjoy tax rises, there is good engagement with government.
He said: “I know there’s been some really deep engagements with the sector over the last four or five months from even before the Labour party moved into become government.
“There’s an increasing recognition that the sector serves a key part in the energy mix. I think we’re moving slowly to a point where everyone is beginning to realise what each other brings to the table.”
‘No justification’ for windfall tax, says business chief
Russell Borthwick, chief executive at Aberdeen and Grampian Chamber of Commerce, said there are “signals the government is listening, although the devil will be in the detail”.
He added: “However, there is no justification for a super tax on ‘windfall profits’ which no longer exist in a world where the oil price has returned to 70dollars
“The damage being done to the North Sea is clear for all to see.
“In the past week alone one major has put the for sales signs up on six fields, another has reported a 30% dip in profits and we have one operator paying millions to relinquish a licence rather than develop a loss-making field.”
Tessa Khan, executive director at Uplift, which backs an urgent transition from oil and gas, said: “It’s only right that oil and gas companies that are profiting from the energy and climate crises are properly taxed.
She added: “The industry has raked in record profits in recent years, yet they have gone to shareholders and debt repayments rather than investment in homegrown, clean energy and jobs.”
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