In response to recent commentary in The Herald article formerly titled “windfall tax bluster no help for North Sea oil firms ahead of crunch Budget, OEUK has issued a letter to the editor refute some of the misconceptions, omissions and errors.
As we navigate the challenges of fiscal policy, global markets, and the energy transition, OEUK urge policymakers to recognise the strategic importance of our offshore industry and the pragmatic choices needed to secure its future.
Full Letter:
Dear Editor,
Mark Williamson’s commentary ‘Pre-Budget bluster on windfall tax rings hollow as oil firms rake in profits’ (26 August) contains a number of misconceptions and omissions that risk distorting public understanding of the North Sea’s energy future.
The North Sea is one of the UK’s greatest industrial assets – a source of energy, jobs, innovation, and economic resilience. But it’s also a complex ecosystem, built on decades of collaboration, investment, and hard-earned expertise. No single operator can sustain it alone.
The North Sea’s proud energy production industry adds more than £20 billion a year in value to the UK economy and supports around 200,000 jobs. Its future is in our hands – and the decisions governments make this year on licensing, investment, and policy will shape our energy future for decades.
Yet the industry is facing strong and persistent headwinds, which were ignored in the above report:
First, the Office for Budget Responsibility originally forecast the Energy Profits Levy (EPL) would raise £65.7 billion between 2023 and 2028. It now estimates only £21.1 billion will be raised due to falling oil and gas prices and declining activity – a shortfall that risks increasing pressure on public finances and consumer taxes. With fiscal reform we can change this path.
Independent geological data shows the basin could produce at least seven billion barrels of oil – more than half the volume needed between now and net zero in 2050. Poor returns and an unfavourable policy environment mean only four billion barrels are currently forecast for production, out of the 10-15 that will be needed. The rest of UK demand will be met by costly imports.
OEUK’s forthcoming fiscal analysis shows the EPL is blocking new field development and stalling projects across 282 operating fields. Major players are closing or scaling back production, with knock-on impacts on infrastructure hubs damaging other operators and the wider system.
Our analysis following last Autumn’s budget showed Labour’s proposed extension of the windfall tax could cost 42,000 jobs and £26 billion in economic value – averaging over 1,000 job losses per month. Sadly, we are seeing these predictions come to pass,
OEUK survey data shows nine out of ten energy supply chain companies are now turning their attention to better opportunities overseas, undermining the UK’s transition to wind, carbon storage and hydrogen production.
The North Sea energy industry is evolving, not ending. With the right framework, it can remain a powerhouse of production, innovation, and decarbonisation. But that future depends on pragmatic choices.
We must choose a path that secures reliable energy, supports skilled jobs, and enables the acceleration and expansion of renewables. That means backing the full breadth of the UK’s offshore energy industry, not betting against it.
Mike Tholen
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