OEUK: new research confirms windfall tax will discourage oil and gas investing

(WO) – Industry body Offshore Energies UK (OEUK), which represents the UK offshore energy industry, has repeated concerns about the government’s windfall taxes in light of new analysis published by The University of Aberdeen.

The research, carried out by Professor Alex Kemp and Artuto Regaldo, shows the Energy Profits Levy (EPL) is likely to discourage investment in new offshore oil and gas developments, particularly smaller fields, in the UK.

By 2030, the UK will be reliant on other countries for at least 80% of its gas and 70% of its oil if there is no investment in new infrastructure. Similarly, without significant investment in offshore wind, the UK could miss the 50Gw by 2030 target that will be key to decarbonizing the economy.

OEUK has said the 75% tax rate is so high it risks driving companies out of UK waters and towards more attractive opportunities elsewhere.  

OEUK also emphasized the impact of the Electricity Generator Levy, which was introduced on low carbon generators last year, and the impact this tax could have on long-term energy infrastructure plans such as offshore wind.

The new paper follows Scottish Government analysis released last week, which found that a decline of Scotland’s oil and gas production will increase Scotland’s emissions, threaten jobs and ultimately could make Scotland poorer.

Commenting on the report, OEUK Sustainability and Policy Director Mike Tholen said, “We have seen more companies raising concerns about the future of the North Sea and their plans to invest there – and this report is a stark reminder that the windfall tax and the uncertainty it brings is ultimately bad for business.

“New exploration is needed simply to maintain the natural decline in production of North Sea oil and gas. Without new investment, production will fall even faster and could leave us nearly wholly reliant on imports within this decade – offshoring our people, skills, and emissions to other countries.

“Ahead of the Spring Statement, OEUK urges government to create an environment that encourages investment in our domestic energy to make sure we can support our own energy security, jobs, and economy as we shift to a sustainable UK.”