Rachel Reeves delays plans to scrap North Sea windfall tax
(Bloomberg) – UK Chancellor of the Exchequer Rachel Reeves backtracked on plans to scrap a controversial windfall tax on North Sea oil and gas, after prices spiked because of the conflict in Iran.
Reeves had been planning this week to announce an early end to the tax, which is due to finish in March 2030, according to a government official who spoke on condition of anonymity about unannounced plans. However, rising prices forced her to put that plan on ice, the person said.
Ministers have been holding meetings with industry for months to explore the impact of ending the Energy Profits Levy before it expires in 2030. Reeves met on Wednesday afternoon with representatives from the oil and gas industry including bp Plc, Adura, and trade association Offshore Energies UK.
See also: UK operators meet with Chancellor Reeves on junking Energy Profits Levy
The tax was introduced by the previous Conservative government after Russia’s invasion of Ukraine triggered a surge in energy prices. The levy has been extended and increased several times, pushing the industry’s headline tax rate to 78%. Offshore Energies UK has consistently pressed for change.
Forecasts made before the Iran war, which were released on Tuesday by the Office for Budget Responsibility, showed the EPL had been expected to stop raising revenue next year as prices were forecast to fall below set thresholds. While markets have surged in recent days, prices are still far below levels reached during the energy crisis of 2022.
For UK North Sea producers, the tax has already had major impact. bp reported paying the UK government £411 million in taxes under the EPL in 2024, amounting to about a third of the company’s UK tax payments that year.
In December, independent North Sea producer Harbour Energy Plc announced plans to cut about 100 jobs after the government said it planned to retain the levy. It was the third round of redundancies at the company tied to the policy, bringing the total to about 700.
European oil majors Eni Spa, Equinor ASA, Repsol SA, Shell Plc and TotalEnergies SE have all revamped their UK oil and gas operations since the levy came into force.
Repsol agreed with Neo Energy Group Ltd. last March to combine their oil and gas assets. In 2024 Equinor and Shell announced their UK North Sea units would merge, while Eni combined its upstream business in the country with Ithaca Energy Plc. Most recently, Total agreed in December to combine its British oil and gas operations with that of Repsol and HitecVision AS.
Top image: Offshore Energies UK
