UK government to end North Sea windfall tax in 2030

13 minutes ago

PA Media Two oil platforms in the North Sea. The one in the foreground is red and has a white cabin with a black tower on top. In the background, the platform is black with a white cabin and white and red tower.

The UK government has announced that the windfall tax on profits made by energy firms in the North Sea will end in 2030.

The Energy Profits Levy (EPL) was introduced in May 2022 after companies recorded skyrocketing profits due to a sharp rise in energy prices.

It was increased to 38% in the most recent UK government budget last year.

It is now to be shelved as part of a new Treasury consultation finding a replacement for the charge, alongside legislation banning new oil and gas exploration licences and more work on the transition to renewable energy.

The department for energy security and net zero said it would work to develop a plan that would deliver a “fair return for the nation during times of unusually high prices”.

And it pledged to consult on a “new regime” for the industry in the North Sea, confirming new licences for oil and gas fields would not be approved.

That comes after the UK government admitted plans for the Rosebank oil field off Shetland had been approved unlawfully after the decision was challenged in court by environmental campaigners.

The Energy Secretary, Ed Miliband, said: “The North Sea will be at the heart of Britain’s energy future. For decades, its workers, businesses and communities have helped power our country and our world.

“Oil and gas production will continue to play an important role and, as the world embraces the drive to clean energy, the North Sea can power our plan for change and clean energy future in the decades ahead.”

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Oil and gas companies had posted record profits after wholesale prices spiked amid Russia’s invasion of Ukraine.

The EPL was introduced by the previous Conservative government, which set the rate at 25% and put it in place until 2025.

It was later increased to 35% by then-chancellor Jeremy Hunt and would run until at least 2029.

Current chancellor Rachel Reeves announced that had been extended until at least 2030 and increased again by 3% in October 2024.

PA Media A general view of an oil rig. The structure is mainly red with a number of multi-coloured shipping crates on the deck.

It meant the total tax rate on companies now stands at 78%, prompting US-based firm Apache to announce it would end its North Sea operations by 2029.

The company described the financial impact as “onerous,” adding continuing to operate in the area would be “uneconomic”.

The price per barrel of oil has since fallen significantly.

Trade association Offshore Energies UK (OEUK) previously warned the tax increase would stifle investment in the sector.

Its chief executive, David Whitehouse, welcomed the news.

He said: “Today’s consultations, on both the critical role of the North Sea in the energy transition and how the taxation regime will respond to unusually high oil and gas prices, will help to begin to give certainty to investors and create a stable investment environment for years to come.”

‘Future-proofed jobs’

Alongside oil and gas production, the government said it wanted to ensure the North Sea would become a “world-leading example” for offshore clean energy.

It said it was “committed” to working with the sector, trade unions and other organisations on a “phased transition” for the oil and gas industry.

The department for energy security and net zero said “tens of thousands” of more jobs could created in offshore renewables.

It said the denial of future oil and gas exploration licences was required to keep global warming to the target of 1.5C, but said it would “engage” with the sector on how to manage existing fields for the remainder of their lifespan.

Mel Evans, climate team leader at Greenpeace UK, said: “Our over-reliance on volatile and expensive fossil fuels is the reason our energy bills have remained so high in recent years.

“With yet more uncertain times ahead, this is a step worth celebrating from the government.

“The only way forward for a secure future means ending our reliance on oil and gas. The government clearly recognises that creating a renewable energy system can provide this country and its energy workers with economic opportunities and stable, future-proofed jobs.”