The editor’s weekly newsletter, curated by Roula Khalaf of the Financial Times, in which she shares her top stories, was recently opened for free access.
A task force led by the business community has urged the UK government to replace the windfall tax on oil and gas at the earliest opportunity, cautioning that the chance to ensure the future of the North Sea is rapidly diminishing. The North Sea Transition Taskforce, with support from the British Chambers of Commerce, criticized the government for delaying its decision to replace the current energy profits levy, which is set to end in 2030.
The existing effective tax rate of 78% on oil and gas profits is reportedly stifling investment and potentially reducing Treasury revenues, according to a report released on Monday. The industry-backed task force advocates for a more balanced tax system that adjusts predictably with hydrocarbon prices, to foster long-term investment in domestic gas which could offset higher carbon footprint imports of liquefied natural gas.
The UK government has initiated a consultation concerning the fiscal regime for oil and gas beyond 2030, and its firm stance against issuing new exploratory drilling licenses. Survey results from the task force revealed widespread concerns among unions and supply chains about the North Sea’s future, prompting calls for government action to restore investor confidence amidst fears over job losses in the fossil fuel sector.
Following 2030, the oil and gas sector is expected to revert to paying a standard tax rate of approximately 40%, with provisions for increased contributions if wholesale prices reach unusually high levels. The task force argued that reaching a consensus on the trigger points for such higher taxes should not necessitate a delay until 2030.
Philip Rycroft, chairman of the task force, emphasized the urgency of the situation, noting that viable businesses are already moving out of the area. The report highlighted several industry moves, including Apache’s withdrawal from UK offshore activities, the merging of Shell and Equinor operations in the North Sea, and employment reductions at BP.
Scottish Labour leader Anas Sarwar expressed support for domestic oil and gas as catalysts for economic growth and energy security, citing potential high-value yields from existing North Sea fields. He emphasized that domestic production was preferable to more costly imports from less stable regions.
The task force further proposed the establishment of a minister-led committee to oversee the transition from oil and gas to renewable energy. The committee, which would include representatives from the Treasury, the Scottish government, and unions, recommended that the North Sea Transition Authority devise a strategic plan by year’s end. Rycroft additionally urged the government to assure the industry of support for drilling in designated areas.
The energy department responded by outlining its efforts to facilitate a fair transition in the North Sea, highlighting investments in offshore wind, hydrogen initiatives, and carbon capture and storage technologies.
However, Uplift, an organization opposing fossil fuels, criticized further drilling and tax reductions for oil and gas companies, arguing they would not support a fair transition for workers. Robert Palmer, Uplift’s deputy director, interpreted the report as an attempt by the oil and gas industry to continue lobbying for lower taxes.
