Today’s Budget took a step forward with a replacement for the damaging Energy Profits Levy but missed the bigger opportunity to address major issues facing domestic energy production, the UK’s net zero ambitions, and the Prime Minister’s ambitions to revitalise British manufacturing industries.
Legislating for the Oil and Gas Revenue Levy, the successor to the Energy Profits Levy, is a welcome step forward, but delaying its implementation until potentially as late as April 2030 will hold back investment at precisely the time the UK needs it.
Decisive action on tax and regulatory blockers would bring forward £50 billion in investment for domestic oil and gas production to boost growth, strengthen energy security and back UK jobs, says Offshore Energies UK.
The Chancellor has declined to accelerate introduction of the Treasury’s proposed Oil and Gas Revenue Levy (OGRL) designed as a permanent successor to the damaging 78% Energy Profits Levy (EPL).
Despite clear evidence of the economic benefits of early introduction, the OGRL will only come into force in 2030 under the terms of a new Finance Bill.
The EPL is currently applied regardless of market conditions and is continuing to drive energy investment abroad.
In OEUK’s submission to the Treasury ahead of the budget OEUK analysis listed more than 100 North Sea oil and gas projects awaiting development.
Under a supportive regulatory and fiscal regime proposed by the OGRL mechanism, these projects could between them attract £50 billion of capital investment between now and 2035.
The budget submission also showed nearly £15 billion in additional tax revenues and 1.3 billion barrels of additional domestic oil and gas production would be achieved with this policy change.
This would reduce UK dependence on imported oil and gas which involves greenhouse gas emissions up to four times higher than domestically produced fuel.
David Whitehouse chief executive of OEUK said:
“This Budget recognised the significant contribution of the North Sea to the UK economy but missed the bigger opportunity to unlock the investment needed to secure its future contribution to jobs, growth and energy security.”
“Legislating for a successor to the damaging Energy Profits Levy is welcome, but 2030 is too late. Bringing that date forward to 2027 would unlock billions of pounds of additional investment ultimately generating £15 billion pounds more tax revenue for the Exchequer.
“This is about more than oil and gas. It is about Britain’s resilience. Reindustrialisation starts at home, attracting investment into UK energy, supply chains and industrial communities. We must back North Sea oil and gas, not imports”
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