The Chancellor has announced changes to the Energy Profits Levy, aiming to safeguard jobs and bolster domestic energy security in the UK oil and gas sector.
The levy will be increased and extended to a 78% rate, with the investment allowance scrapped. However, the 100% first-year capital allowance and decarbonisation allowance will remain.
The EPL is set to expire in March 2030, barring an earlier trigger of the Energy Security Investment Mechanism.
OEUK suggests an alternative approach that could yield greater economic benefits and facilitate a homegrown transition towards climate goals, whilst preserving the sector’s supply chain and supporting over 200,000 jobs nationwide.
The Chancellor also reaffirmed support for GB Energy and funding for carbon capture, storage, and hydrogen projects across the UK.
David Whitehouse, CEO Offshore Energies UK comments: “We heard the Chancellor recognise the role of the oil and gas sector to support high quality jobs and strengthen the UK’s energy security.
“We welcome that and the meetings and dialogue which have taken place between industry and the new government.
“While the government will increase and extend the Energy profits levy on oil and gas production to a headline rate of 78% and remove the associated investment allowance, the 100% first-year allowance and the decarbonisation allowance will be retained. The Chancellor also confirmed that the EPL will fall away in March 2030.
“However, with an increase in tax despite commodity prices at recent lows, there is no hiding that this is a difficult day for the sector.
“Oil and gas companies, our world class supply chain and our highly skilled people will support the energy transition. We will not be successful without them.
“It’s why there is a different path for this industry which can deliver the energy future we all agree on. With industry and government working in partnership we can protect the North Sea as a national economic asset. It can and should serve as an engine to realise UK economic growth and climate goals.
“We welcome that the government will consult in early 2025 on how the oil and gas tax regime can encourage investment and respond to changes in the oil price. We also note the consultation on end use emissions for oil and gas projects.
“That’s why we are calling for a homegrown energy transition – making the most of our whole homegrown sector – from oil, gas, wind, hydrogen to carbon capture projects with fair and competitive stable policies that keep jobs, skills and capital in the UK.”
