UK oil and gas body says government tax plan will cost billions in revenue

Leading UK oil and gas industry trade body Offshore Energies UK (OEUK) has filed a report showing that the government’s proposed fiscal policy would generate a loss of more than $20 billion compared to the economic contribution under the current windfall tax regime.

The loss comes from an expected reduction in investment by oil and gas producers in UK projects, with capital investments over the period expected to fall to nearly $4b from $27.3b under the current regime.

OEUK’s new data models the impact of the government’s proposed increased energy profits levy on the UK economy.

Offshore energy sector

OEUK said the analysis shows the policy will undermine the UK offshore energy sector’s ability to support the government’s overarching goal of driving economic growth.

The data also identifies a potential loss of approximately 35,000 jobs due to projects not going ahead.

The OEUK also found that 63% of additional oil and gas production that could be sanctioned under the current regime would be uneconomic.

Net-zero costs

OEUK chief executive officer David Whitehouse said that this would make the UK more reliant on other countries to meet energy demand at a cost to the UK economy and its net-zero ambitions, adding that the data had been published to help inform decision-making ahead of the UK Chancellor’s autumn statement in October.

“The Prime Minister has said that the budget will be painful [and] this industry recognises that difficult decisions will need to be made,” Mr Whitehouse said.

“This is a government that has made economic growth its main priority and yet our analysis shows that its policy will ultimately reduce this sector’s contribution to the UK economy.”

“This paper shows that proposals to go further will trigger an accelerated decline of domestic production and a corresponding reduction in taxes paid, jobs supported and wider economic value generated.”