EurOil: UK extends oil and gas windfall tax by a year

The UK government has announced it will extend the windfall tax imposed on oil and gas profits by another year, much to the chagrin of North Sea producers.

The Energy Profits Levy, as it is known, was introduced in May 2022 to generate funds to help businesses and households cope with soaring energy bills, at a time when oil and gas companies were earning record income. Instead of March 2028, the 35% charge will now expire in 2029.

The extension was announced by UK Chancellor Jeremy Hunt when he unveiled his budget on March 6. Prior to the announcement, the Office for Budget Responsibility had anticipated that tax receipts from the oil and gas industry – including corporation and petroleum revenue tax – would raise GBP6.1bn ($7.8bn) in 2023-24, and decline steadily to GBP2.1bn by 2028-29 amid falling production and energy prices.

The North Sea oil and gas industry has fiercely criticised the windfall tax, insisting that it no longer reflect conditions on the market, which has seen prices fall significantly since reaching all-time records in 2022. Producers have said that the levy deters investment and will accelerate production decline, leaving the UK increasingly dependent on imports for its energy. They also say smaller companies are disproportionately affected.

If you’d like to read more about the key events shaping Europe’s oil and gas sector then please click here for NewsBase’s EurOil Monitor.