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The UK government must urgently replace the windfall tax on North Sea oil and gas operations well before its scheduled expiration in 2030, warns the North Sea Transition Taskforce, an industry-backed coalition supported by the British Chambers of Commerce.
The Energy Profits Levy (EPL), introduced in 2022 to capitalize on soaring energy prices, remains a contentious issue. Earlier this month, the government initiated a consultation on potential future tax frameworks. However, the taskforce insists that waiting until the sunset clause in 2030 is economically damaging and jeopardizes the sector’s stability.
Industry Uncertainty and Investment Drain
Since the EPL’s introduction, North Sea operators have consistently voiced concerns over unpredictable tax policies. The instability, coupled with rising tax burdens, has prompted several energy firms to scale back investments or exit the UK market entirely. Industry leaders argue that a lack of fiscal certainty will only increase the nation’s reliance on costly oil and gas imports.
“If there is broad consensus for a revised tax framework with reasonable thresholds, there is no rational reason for the Treasury to delay replacing the flawed EPL,” the North Sea Transition Taskforce stated in its latest report.
The group calls for a more proportionate and adaptable taxation model that adjusts predictably with oil and gas price fluctuations.
Growing Pressure for Tax Overhaul
The push for change has gained momentum as major industry players cite the windfall tax as a deterrent to investment. Brian Gilvary, chairman of Ineos Energy, declared in December that the current tax structure makes it “impossible for companies to invest.”
In November, U.S.-based oil producer Apache announced plans to halt UK North Sea oil production by 2030, attributing its decision to the adverse impact of the windfall tax.
Philip Rycroft, chair of the taskforce, emphasized the urgency in an interview with the Financial Times: “Speed is of the essence here—good businesses are already voting with their feet.”
With mounting pressure from industry stakeholders, the UK government faces a critical decision: reform the tax regime swiftly to secure long-term energy investments or risk further capital flight from the North Sea sector.
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