UK Offshore Oil and Gas Industry Says Standoff With Government Is Over

The UK offshore oil and gas industry has announced the resolution of a recent standoff with the government over tax policies, despite facing an increased fiscal burden from a new tax hike implemented by the Labour cabinet. This adjustment was confirmed earlier this week when Chancellor of the Exchequer, Rachel Reeves, presented her first budget under the Labour government.

In the Autumn Statement on Wednesday, Reeves disclosed that the windfall tax on North Sea operators, known as the Energy Profits Levy (EPL), will rise from 35% to 38%, taking effect on November 1, 2024. Additionally, this tax now extends to expire on March 31, 2030, a year longer than the previous terms, while the 29% investment allowance is being eliminated. Nonetheless, the government will maintain 100% first-year allowances and operations for decarbonization to support job retention and bolster energy security.

Offshore Energies UK (OEUK), the principal trade association for the sector, expressed concern, stating that the tax increase amid low commodity prices marks a challenging period for the industry. Nonetheless, OEUK’s CEO, David Whitehouse, acknowledged the government’s willingness to engage in consultations in early 2025 to discuss the oil and gas tax regime and its alignment with evolving oil prices.

Mike Tholen, OEUK’s sustainability and policy director, emphasized that the shift towards open dialogue is a positive development. He noted that this marks a transition from a period of standoff to active engagement, aimed at fostering a more cooperative relationship between the government and industry leaders to address regulatory and investment challenges in the UK North Sea.

Story via OilPrice.com