Latest news with #windfalltax
Telegraph
27-05-2025
- Business
- Telegraph
Miliband's North Sea shutdown causing ‘irreparable damage'
Ed Miliband's retreat from the North Sea is causing 'irreversible damage' to Britain's oil and gas industry, a leading energy producer has warned. Amjad Bseisu, chief executive of listed oil company EnQuest, criticised the Energy Secretary's windfall tax, claiming it had sparked a swathe of job losses. He has called for an urgent rethink on the levy as falling oil prices pile more pressure on North Sea firms, which are facing a 78pc tax on profits. Mr Bseisu said: 'The recent stepdown in commodity prices has further amplified calls for the UK Government to remove the Energy Profits Levy and return the North Sea to a position of global competitiveness. 'The status quo, which sees Britain as the only country levying a windfall tax on homegrown energy producers, where no windfall profits exist, is resulting in irreversible damage to this strategic national industry and is driving job losses across the sector.' His comments come as a growing number of North Sea producers consider cutting jobs and scaling back investment. This is partially in response to the Government's decision to increase the oil and gas windfall tax from 75pc to 78pc last year, while also extending the levy for an extra year to 2030. The industry has also been hammered by Mr Miliband's decision to ban all new drilling in the North Sea, as he seeks to prioritise investment in renewables to help Britain achieve its net zero targets. Mounting pressure led to Harbour Energy, the UK's largest oil and gas producer, announcing plans to cut 250 jobs in Aberdeen earlier this month. Scott Barr, managing director of Harbour Energy's UK business, blamed the job losses on 'the Government's ongoing punitive fiscal position and a challenging regulatory environment'. A new report also revealed that Britain's oil and gas industry is already suffering an exodus of staff. According to a survey by the Aberdeen and Grampian Chamber of Commerce, almost half of North Sea producers said their employees were leaving the UK to work abroad. They said the moves were caused by weak domestic confidence, uncompetitive government policy and a lack of viable projects in the UK. It comes after a separate analysis found last week that the windfall tax would leave 1.5bn barrels of oil and gas stuck in abandoned North Sea oil wells.
Telegraph
23-05-2025
- Business
- Telegraph
Labour's tax raid to trap 1.5bn barrels of oil and gas under North Sea
Labour's windfall tax on oil and gas producers will leave 1.5bn barrels of oil and gas stuck in abandoned North Sea oil wells, according to new analysis of the levy's impacts. The predicted output between now and 2050 has fallen 40pc from 3.6bn barrels of oil equivalent to just 2.1bn barrels, according to a report from investment bank Stifel. The findings are based on data supplied by the North Sea Transition Authority (NSTA), the Government's oil and gas regulator. The slump in expected output comes after a surge in the number of companies abandoning productive wells, following Rachel Reeves's decision to extend the tax on oil and gas profits to 78pc. Ed Miliband, the Energy Secretary, has also banned new drilling. Christopher Wheaton, a Stifel analyst, warned that the tax take from oil and gas was also set to plummet, partly because of declining production volumes but also because the price of oil has fallen so far that there is no longer a windfall to tax. The report said: 'The UK North Sea industry is being destroyed by taxes that are too high, taxes which threaten energy security, jobs, investment and economic growth. 'The impact of lower investment and production is already being felt through job losses, lower tax receipts and more energy imports. 'The Office for Budget Responsibility's current forecast for North Sea tax receipts to 2030 is £10bn too high due to declining production and lower energy prices.' The forecast represents a potential headache for Ms Reeves, the Chancellor, who has left herself only a narrow margin to meet her fiscal rules and is already borrowing more than forecast. The UK has about 280 oil and gas fields that last year produced 29bn cubic metres of gas and 28m tonnes of oil. These amounts were lower than a decade ago when the UK produced 38bn cubic meters of gas and 38m tonnes of oil. The reduction has largely been driven by natural decline but experts have warned that recent tax raids on the sector have accelerated the North Sea basin's demise. The NSTA's 2023 production forecasts said that the UK would produce oil and gas equivalent to 46m tonnes of oil in 2028. But its latest forecasts, just issued, downgrade that to 40m tonnes, falling further to 33m tonnes in 2030. By 2040, the NSTA predicts the UK will be producing just 9m tonnes of oil and 4bn cubic metres of gas – way below what the country will still need by then, meaning more imports. The fresh forecasts suggest the windfall tax, or Energy Profits Levy, has roughly doubled the rate of decline. Robin Allan, the chairman of Brindex, an offshore industry trade body, said: 'An accelerated decline of North Sea output will see UK dependency on imports reach more than 85pc by 2030. The windfall tax is self-defeating and it should be removed.' The tax was first proposed by Labour in opposition but was adopted by the then Conservative government under Rishi Sunak in 2022 in response to the surge in oil and gas prices caused by the Ukraine conflict. Mr Sunak initially said it would only remain in place while the windfalls lasted. However, he and then Labour subsequently decided to retain it until 2030, even though oil prices have fallen from a peak fo $139 a barrel to about $60 now. Offshore operators say the tax is so high that there is now more incentive to decommission productive wells and claim the associated tax rebates than to expand production. Serica, one of the largest UK operators, separately warned on Thursday that Ms Reeves's windfall tax and Mr Miliband's ban on new exploration was killing off the UK industry. David Latin, Serica's chairman, said: 'The impact of the inappropriate fiscal environment, and the years of uncertainty, is taking a heavy toll. UK production fell 5pc in 2024, drilling activity is at a record low, 10,000 jobs have been lost and companies continue to exit the UK North Sea. 'All of this will reduce tax receipts going forward and, given demand which will not go away any time soon, lost production will have to be imported – imports which are worse for the environment since they involve significantly increased emissions.' A government spokesman dismissed criticisms, saying: 'The Government has reformed the Energy Profits Levy to support investment and give industry certainty and stability. 'We are delivering a fair and orderly transition in the North Sea, with the biggest ever investment in offshore wind and two first-of-a-kind carbon capture and storage clusters.' The Conservatives, the original architects of the tax, said the political consensus on the windfall levy was gone forever. Andrew Bowie, Conservative shadow energy spokesman, said: 'The report shows in the starkest terms what many have been warning about for months if not years – that the windfall tax is killing the North Sea oil and gas industry. 'Up to 10,000 people have already been laid off with 250 in the last weeks alone. And the new jobs promised in renewables just do not exist yet. Labour must think again and speed up any future fiscal arrangement for the North Sea before we see an entire industry disappear.' Richard Tice, energy spokesman for the Reform Party, said: 'A Reform government would encourage people in the oil and gas sector to get ready to explore when we win the next general election. We are urging them to have new licences ready to approve on an accelerated timeframe.'
Yahoo
23-05-2025
- Business
- Yahoo
Labour's tax raid to trap 1.5bn barrels of oil and gas under North Sea
Labour's windfall tax on oil and gas producers will leave 1.5bn barrels of oil and gas stuck in abandoned North Sea oil wells, according to new analysis of the levy's impacts. The predicted output between now and 2050 has fallen 40pc from 3.6bn barrels of oil equivalent to just 2.1bn barrels, according to a report from investment bank Stifel. The findings are based on data supplied by the North Sea Transition Authority (NSTA), the Government's oil and gas regulator. The slump in expected output comes after a surge in the number of companies abandoning productive wells, following Rachel Reeves's decision to extend the tax on oil and gas profits to 78pc. Ed Miliband, the Energy Secretary, has also banned new drilling. Christopher Wheaton, a Stifel analyst, warned that the tax take from oil and gas was also set to plummet, partly because of declining production volumes but also because the price of oil has fallen so far that there is no longer a windfall to tax. The report said: 'The UK North Sea industry is being destroyed by taxes that are too high, taxes which threaten energy security, jobs, investment and economic growth. 'The impact of lower investment and production is already being felt through job losses, lower tax receipts and more energy imports. 'The Office for Budget Responsibility's current forecast for North Sea tax receipts to 2030 is £10bn too high due to declining production and lower energy prices.' The forecast represents a potential headache for Ms Reeves, the Chancellor, who has left herself only a narrow margin to meet her fiscal rules and is already borrowing more than forecast. The UK has about 280 oil and gas fields that last year produced 29bn cubic metres of gas and 28m tonnes of oil. These amounts were lower than a decade ago when the UK produced 38bn cubic meters of gas and 38m tonnes of oil. The reduction has largely been driven by natural decline but experts have warned that recent tax raids on the sector have accelerated the North Sea basin's demise. The NSTA's 2023 production forecasts said that the UK would produce oil and gas equivalent to 46m tonnes of oil in 2028. But its latest forecasts, just issued, downgrade that to 40m tonnes, falling further to 33m tonnes in 2030. By 2040, the NSTA predicts the UK will be producing just 9m tonnes of oil and 4bn cubic metres of gas – way below what the country will still need by then, meaning more imports. The fresh forecasts suggest the windfall tax, or Energy Profits Levy, has roughly doubled the rate of decline. Robin Allan, the chairman of Brindex, an offshore industry trade body, said: 'An accelerated decline of North Sea output will see UK dependency on imports reach more than 85pc by 2030. The windfall tax is self-defeating and it should be removed.' The tax was first proposed by Labour in opposition but was adopted by the then Conservative government under Rishi Sunak in 2022 in response to the surge in oil and gas prices caused by the Ukraine conflict. Mr Sunak initially said it would only remain in place while the windfalls lasted. However, he and then Labour subsequently decided to retain it until 2030, even though oil prices have fallen from a peak fo $139 a barrel to about $60 now. Offshore operators say the tax is so high that there is now more incentive to decommission productive wells and claim the associated tax rebates than to expand production. Serica, one of the largest UK operators, separately warned on Thursday that Ms Reeves's windfall tax and Mr Miliband's ban on new exploration was killing off the UK industry. David Latin, Serica's chairman, said: 'The impact of the inappropriate fiscal environment, and the years of uncertainty, is taking a heavy toll. UK production fell 5pc in 2024, drilling activity is at a record low, 10,000 jobs have been lost and companies continue to exit the UK North Sea. 'All of this will reduce tax receipts going forward and, given demand which will not go away any time soon, lost production will have to be imported – imports which are worse for the environment since they involve significantly increased emissions.' A government spokesman dismissed criticisms, saying: 'The Government has reformed the Energy Profits Levy to support investment and give industry certainty and stability. 'We are delivering a fair and orderly transition in the North Sea, with the biggest ever investment in offshore wind and two first-of-a-kind carbon capture and storage clusters.' The Conservatives, the original architects of the tax, said the political consensus on the windfall levy was gone forever. Andrew Bowie, Conservative shadow energy spokesman, said: 'The report shows in the starkest terms what many have been warning about for months if not years – that the windfall tax is killing the North Sea oil and gas industry. 'Up to 10,000 people have already been laid off with 250 in the last weeks alone. And the new jobs promised in renewables just do not exist yet. Labour must think again and speed up any future fiscal arrangement for the North Sea before we see an entire industry disappear.' Richard Tice, energy spokesman for the Reform Party, said: 'A Reform government would encourage people in the oil and gas sector to get ready to explore when we win the next general election. We are urging them to have new licences ready to approve on an accelerated timeframe.' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Daily Mail
20-05-2025
- Business
- Daily Mail
Windfall tax 'destroying' North Sea oil and threatening growth, analysts warn
Britain's energy profits levy is 'destroying' the country's North Sea oil industry, while undermining energy security and the economy, analysts have warned. The so-called windfall tax was implemented in May 2022 in response to soaring energy prices in the wake of Russia's invasion of Ukraine. Initially introduced as a temporary tax on the profits of oil and gas companies operating in the UK, the EPL is currently a 38 per cent levy on top of existing taxes, bringing the headline rate for producers to 78 per cent. The impact has been to see a collapse in North Sea investment, according to analysts at Stifel, and a sharp fall in the Treasury's total tax take as a result. This has been exacerbated by a sharp fall in energy costs, with oil prices now down 50 per cent since the invasion of Ukraine in 2022 and gas prices 80 per cent below their post-invasion peak. Stifel estimates the 'self-defeating' tax will cost the Treasury £3billion in tax receipts between 2025 and 2030. The broker wrote in a note: 'The UK North Sea 'windfall' tax has not raised the additional revenue that was expected because there has not been a windfall to tax. 'The UK North Sea industry is being destroyed by taxes that are too high, taxes which threaten energy security, jobs, investment and economic growth. 'The impact of lower investment and production is already being felt through job losses, lower tax receipts, and more energy imports.' Broker estimates the windfall tax hit to production will cost HM Treasury £3bn by 20230 Reliance on overseas oil and gas imports not only hurt's the country's national security, Stifel added, it threatens the UK's carbon reduction goals. Stifel wrote: 'Without the UK North Sea, total CO2 emissions from the UK's energy mix would be higher, with UK exporting its carbon emissions (along with jobs and investment) to energy producers like Norway and the US. 'While shutting down the North Sea energy industry would make the UK's own emissions look better, this is merely because higher emissions are being produced elsewhere, outside the UK.' The broker called for the removal of the windfall tax. It estimates doing so will 'stimulate a recovery in investment in the UK North Sea', leading to an overall higher tax take across the next five years. The move would also remove a threat to jobs, and 'improve the UK's domestic security of energy supply at a time of rising global uncertainty'. Stifel added: 'It's time for Energy Pragmatism.'
Bloomberg
19-05-2025
- Business
- Bloomberg
The UK Is Taxing an Oil Windfall That Doesn't Exist
What's an 'unusually high' oil price? The answer will dictate the moribund British oil industry's future. Once a source of national pride and economic security, the North Sea today faces a grim future under the weight of inflated taxes targeting unusually high prices. In May 2022, weeks after the Russian invasion of Ukraine pushed Brent crude to $139 a barrel, the government, then controlled by the Conservative party, slapped a windfall tax on producers. The Energy Profits Levy took the North Sea petroleum industry's tax rate to 65%. It was supposed to continue until the end of 2025. But soon after, the government hiked the tax again — to 75% — and delayed its sunset until 2028. Finally, last year, the Labour government increased the rate to 78% and extended it to 2030. The impact has been devastating. Historic names of the North Sea are announcing they will shut down all production far earlier than expected. Others are cutting spending and firing workers. Oil output has fallen to a 48-year low. Now the government wants a rethink: a new system that adapts to different price levels, providing certainty to companies and their investors. Thus why it's asking what unusually high prices mean, so it can create a tiered rate. The fiscal review is part of a broader consultation about the North Sea, where green policy, energy security and tax revenue collide. Everyone involved in the ongoing consultation, from oil companies to green activists, is coming up with their own answers. Surely, there's a mathematical formula that solves the question of what unusually high prices are. But there's also common sense. Back in 1964, the US Supreme Court faced a tricky controversy. A case required answering a delicate question: What's 'obscenity'? The court hesitated with a definition. But Justice Potter Stewart found a way out with a famous common-sense precedent: 'I know it when I see it.' Well, look at the market now and you won't see obscenely high oil prices. In nominal terms, Brent is changing hands at around $65 a barrel, the same level as 20 years ago. Adjust the price to account for the inflation and, in real terms, oil is today cheaper than it was in the mid-1980s. Simply put, the UK is taxing a windfall that doesn't exist.
