The British government’s plan to raise the windfall tax on North Sea oil and gas producers. In late July, the Labour government announced changes to the Energy Profits Levy (EPL), including increasing the tax rate from 35% to 38% starting 1 November. This will bring the overall tax rate on oil and gas operations to 78%, making it one of the highest globally. The duration was also extended until March 2030.

The tax hike is expected to reduce state revenue by GBP 12 billion (USD 16 billion), according to a report by industry group Offshore Energies UK published today, 2 September 2024.

The proposed changes include removing the EPL’s 29% investment allowance, which allows companies to offset taxes by reinvesting capital into their operations.

Offshore Energies UK has forecasted that the new EPL regime will result in a GBP 12 billion loss in tax revenue between 2025 and 2029 compared to the current system.

“We remain dedicated to engaging in a constructive dialogue with the oil and gas sector to finalise adjustments that will reinforce the windfall tax, ensuring a gradual and responsible transition for the North Sea,” said a Treasury spokesperson.

The Labour government has set targets to reduce carbon emissions, focusing on expanding renewable energy and reducing dependence on oil and gas.

North Sea oil and gas production has been on a steady decline, falling from a peak of 4.4 million barrels of oil equivalent per day (boed) at the start of the millennium to about 1.3 million boed today. The North Sea Transition Authority (NSTA) predicts production will drop to less than 200,000 boed by 2050.