British government plans to increase a windfall tax on North Sea oil and gas producers would lead to a nearly £12 billion ($16bn) drop in revenue to the state and accelerate a decline in output, an industry group said yesterday.
The Labour government, elected in July, has said the changes will help to achieve a ramp-up in renewable power and shift from oil and gas to reduce carbon emissions and help curb global warming.
Industry group Offshore Energies UK forecast the changes would reduce tax revenue by £12bn between 2025 and 2029 compared to the current tax regime. Capital investment in the sector over the period is expected to fall to £2.3bn from around £14bn, OEUK said.
The proposed tax changes “will trigger an accelerated decline of domestic (oil and gas) production, and a corresponding reduction in taxes paid, jobs supported, and wider economic value generated,” OEUK CEO David Whitehouse said in a statement.
North Sea focused NEO Energy said the fiscal and regulatory uncertainty would slow investment across its portfolio.
NEO owns half of the Buchan Horst development project in the UK North Sea with Serica Energy and Jersey Oil & Gas owning 30 per cent and 20pc, respectively.
Production in the mature North Sea basin has declined from a peak of 4.4 million barrels of oil equivalent per day (boed) at the start of the millennium to around 1.3m boed today.
The North Sea Transition Authority (NSTA) regulator has forecast it will decline to less than 200,000 boed by 2050.
Shortly after its election, Britain’s Labour government said it would increase the Energy Profits Levy (EPL) to 38pc from 35pc starting November 1, bringing the headline rate of tax on oil and gas activities to 78pc, among the highest in the world. Its duration was also extended by a year to March 2030.