Jeremy Hunt, the Chancellor has been given a tough but constructive message from UK oil and gas producers at a meeting in Edinburgh today (December 9 2022).
Deirdre Michie, chief executive of Offshore Energies UK, the leading trade body for the offshore energies industry, attended the meeting along with several of OEUK’s energy producer members. They wanted to underline the impact the increased windfall tax is already having on the UK’s energy security and economy.
It follows the UK government’s decision to increase the Energy Profits Levy (EPL), or windfall tax, on oil and gas companies from 25% to 35%. When added to existing levies this brings the total taxes on UK oil and gas production to 75%, one of the highest rates in the world.
There have already been several reports of companies scaling back projects and their investment plans in response to the increased tax. The measure also comes at a time when the UK needs to prioritise homegrown oil, gas and offshore wind production in order to ensure secure supplies now and in future.
Yesterday in advance of the meeting, OEUK again outlined its three asks:
- Scrap the windfall tax on homegrown energy when oil and gas prices fall back to normal levels – as originally pledged by the Treasury when the windfall tax was first introduced.
- Rebuild confidence – The industry and its investors need the confidence to invest in the UK’s long-term future
- Better taxes Deliver a long term sustainable and competitive fiscal regime that supports consumers and industry
The Fiscal Forum, led by the Treasury, is a longstanding group of industry and government which aims to boost energy security and economy by making the most of oil and gas resources in UK waters.
At the meeting the Chancellor heard from OEUK and others as they raised concerns about the impact of the tax on the whole sector – including its supply chain which relies on ongoing projects by operators to produce oil and gas in order to sustain their businesses.
Speaking afterwards, OEUK Chief Executive Deirdre Michie OBE said: “”This was a constructive meeting where the Chancellor heard concerns from industry as to why the extension of the Energy Profits Levy is a tax too far.
“We told him that the 75% tax rate will undermine the ability of energy producing companies to invest in the homegrown oil, gas and wind supplies we need. Without this, we will be less secure and will import more energy – while losing the benefits provided by the domestic industry in terms of taxes paid, jobs supported and investment in the wind and hydrogen projects.”
“The offshore energy industry recognises these are tough times with many people feeling the impact of the energy price crisis. The Chancellor committed to reflect further on the proposals put forward by industry, including our call to remove the windfall tax when oil and gas prices fall back to normal levels.
“Continued discussions with government are essential if we are to having any hope of restoring confidence to the companies we need to help protect UK energy security and boost economic growth.
“At the moment our members produce nearly 40% of the nation’s gas. We can only maintain that kind of output by constant investment. We need to rebuild confidence so that the offshore industry can continue to provide energy for consumers now as well as building the low-carbon energy systems of the future.”