Offshore Energies UK has responded to the announcement of the Energy Security Investment Mechanism for the Energy Profits Levy (windfall tax) that will see the current total 75 per cent rate be removed if prices fall in the future.
The UK Government has this morning announced that the levy will remain in place until March 2028, introducing a mechanism which means if oil and gas prices fall the tax rate for oil and gas companies will return to 40%. This would be triggered when oil reaches $71.40 per barrel and gas reaches £0.54 per therm for two consecutive quarters.
The industry still faces considerable challenges to safeguard the jobs of its 200,000 strong skilled workforce, ensure the UK’s homegrown energy security and power the transition to net zero and beyond with homegrown oil and gas rather than imports.
OEUK Chief Executive David Whitehouse said:
“We’ve always been clear that when the windfall conditions go, the windfall tax should go.
“This is a step in the right direction, but many more will need to be taken to restore confidence to our sector. We will now work closely with government and lenders to understand the detail of the measure and its effectiveness at unlocking investment.
“Enabling continued UK energy production now and in future depends on a predictable and fair fiscal environment. The UK must be competitive if we are to be successful in the global race for energy investment.
“We are proud to make a huge contribution. In 2022/23 alone we will add over £20bn to the UK economy overall. We provide over 200,000 good, skilled jobs across the length and breadth of the UK.
“As we build the future there is no simple choice between oil and gas or renewables. The reality is we need both. In the mid-2030s, oil and gas will still provide 50% of our energy needs.
“By investing in homegrown production, we avoid costlier, less secure and higher carbon imports while supporting an industry we need to make cleaner, more affordable energy in the UK, for the UK. Our sector is expanding into renewable energy, supported by a world class supply chain.
“We will continue to work closely with government and all parties on the journey to restore sector confidence.”