UK to overhaul oil and gas windfall tax regime after 2030

The UK Government has announced plans to reform its windfall tax regime on oil and gas producers once the current levies expire in 2030.

The government aims to transform the North Sea into a renewables hub, focusing on clean energy sources alongside existing oil and gas production, reported Reuters.

The government is seeking feedback from industry players and other stakeholders on policy options, including taxing “excess revenue”.

The consultation, open until 28 May, does not specify price thresholds.

The new regime may apply to prices after the use of financial products that shield producers from price fluctuations.

The Conservative Government first introduced a 25% windfall tax in May 2022 following soaring energy prices due to Russia’s invasion of Ukraine.

The tax was increased to 35% in November 2022 and extended by one year in March 2024.

In October, the UK’s Labour Government increased the windfall tax on oil and gas producers to 38% from 35%, extending the levy by one year to March 2030.

This raised the headline tax rate on the sector to 78%, one of the highest globally.

Oil and gas producers have expressed concerns that the windfall levy has affected profits and created investment uncertainty, accelerating the decline of oil and gas output in the British North Sea.

The UK faces a critical situation, with gas reserves at “concerningly low” levels amidst falling temperatures and increased demand from gas-fired power stations.

Centrica, an energy services company, pointed out that gas reserves were much lower than last year, with only 26% of capacity currently full, about half the usual level.

The same trend is seen across Europe, with gas storage at 69% capacity on 7 January, compared with 84% at the same time in 2024.

UK Energy Minister Ed Miliband stated that oil and gas production would continue to play a crucial role in the energy mix.

The government is committed to maintaining existing fields for their lifetime and does not intend to issue new oil and gas licences, the report said.

In addition to oil and gas production, the government aims to ensure the growth of clean energy sources such as hydrogen, carbon capture and wind, creating new jobs in the process.

“UK to overhaul oil and gas windfall tax regime after 2030” was originally created and published by Offshore Technology, a GlobalData owned brand.

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