UK North Sea tax changes mean $12 billion revenue drop, industry body says (updated)
02/09/2024 08:41
*
Increase effective from Nov. 1
*
Tax rate would be among highest in the world
*
Government says change will help shift to renewable energy
(Recasts, adds Neo Energy announcement)
LONDON, Sept 2 (Reuters) - British government plans to
increase a windfall tax on North Sea oil and gas producers would
lead to a nearly 12 billion pound ($16 billion) drop in revenue
to the state and accelerate a decline in output, an industry
group said on Monday.
The Labour government, elected in July, has said the changes
will help to achieve a ramp-up in renewable power and shift from
oil and gas to reduce carbon emissions and help curb global
warming.
Industry group Offshore Energies UK forecast the changes
would reduce tax revenue by 12 billion pounds between 2025 and
2029 compared to the current tax regime.
Capital investment in the sector over the period is expected
to fall to 2.3 billion pounds from around 14 billion pounds,
OEUK said.
The proposed tax changes "will trigger an accelerated
decline of domestic (oil and gas) production, and a
corresponding reduction in taxes paid, jobs supported, and wider
economic value generated," OEUK CEO David Whitehouse said in a
statement.
North Sea focused NEO Energy said the fiscal and regulatory
uncertainty would slow investment across its portfolio.
NEO owns half of the Buchan Horst development project in the
UK North Sea with Serica Energy and Jersey Oil & Gas owning 30%
and 20%, respectively.
Production in the mature North Sea basin has declined from a
peak of 4.4 million barrels of oil equivalent per day (boed) at
the start of the millennium to around 1.3 million boed today.
The North Sea Transition Authority (NSTA) regulator has
forecast it will decline to less than 200,000 boed by 2050.
Shortly after its election, Britain's Labour government said
it would increase the Energy Profits Levy (EPL) to 38% from 35%
starting Nov. 1, bringing the headline rate of tax on oil and
gas activities to 78%, among the highest in the world. Its
duration was also extended by a year to March 2030.
The changes will also include scrapping the levy's 29%
investment allowance, which lets companies offset tax from
capital that is re-invested.
A Treasury spokesperson said: "We are committed to
maintaining a constructive dialogue with the oil and gas sector
to finalise changes to strengthen the windfall tax, ensuring a
phased and responsible transition for the North Sea."
($1 = 0.7606 pounds)
(Reporting by Ron Bousso
Editing by Andrew MacAskill, Tomasz Janowski and Barbara Lewis)
((ron.bousso@thomsonreuters.com; +44 (0) 2075422161; Reuters
Messaging: ron.bousso.reuters.com@reuters.net))