Offshore Energies UK (OEUK) has written to the Chancellor John Healey asking for urgent talks ahead of October’s Budget to re-affirm the Government’s commitment to a new tax regime for North Sea oil and gas production.
Geopolitical volatility is affecting energy security and eroding investor confidence in the North Sea. OEUK says bringing forward the Oil and Gas Revenue Levy (OGRL) from 2030 to early 2027 would be a “win-win” for Britain, offering additional government funds that could be used to address the cost of living crisis.
OEUK has calculated the new tax would unlock £50 billion worth of investment supporting jobs and providing a major boost to the economy. By investing more the energy sector pays more tax not less.
The call for reform comes exactly six months to the day since Rachel Reeves, the previous Chancellor, told energy companies that the government supported in principle the end to the Energy Profits Levy and the introduction of a new windfall mechanism.
The Oil and Gas Revenue Levy – the Treasury’s permanent successor tax to the Energy Profits Levy – proposes a 35 per cent levy on revenues when the price of a barrel of oil is above $90 and a therm of gas is above 90p, in addition to the ring fenced corporation tax rate of 30% and the supplementary charge of 10%.
It follows unconfirmed reports last weekend that Chancellor Healey was considering a further extension to the temporary Energy Profits Levy (EPL), which was introduced in 2022 following Russia’s full invasion of Ukraine, and imposes a headline 78% rate of tax on North Sea production profits.
OEUK Chief Executive David Whitehouse said:
“Six months ago today, the last Chancellor Rachel Reeves told industry that she supported in principle the end of the Energy Profits Levy and the introduction of a new, fairer windfall mechanism.
“The future of the sector and Britain’s ability to continue domestic oil and gas production depend on a fiscal landscape that encourages investment.
“The Treasury’s proposals offer a tax regime that responds appropriately to market conditions rather than treating ordinary commercial North Sea returns as a windfall.
“We are not arguing against higher taxes during periods of high prices. We are asking John Healey to carry forward the policy of his predecessor and work with our offshore sector to implement the OGRL in early 2027.
“Bringing the new levy forward to next year would be a ‘win-win’ for Britain. It recognises the social advantages of prioritising homegrown energy over imported energy which involves higher methane emissions, and it will revitalise investment in the North Sea. More investment means more security, more jobs for the UK and more tax revenue for the Treasury.
“As Government sets-out its reindustrialisation agenda, the Chancellor has been vocal in his commitment to British resources, British jobs, and British security. Supportive North Sea policies will undoubtedly boost these commitments.”
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