UK Energy Sector Calls for Fiscal Reforms and Incentives in North Sea
Posted 20/11/2023 12:05
Energy leaders are urging the UK government for fiscal reforms and incentives in the North Sea, emphasizing the need for changes in windfall taxes and increased support for low-carbon investments. Representatives from the energy sector have made specific requests related to windfall taxes, Contracts for Difference (CfDs), and incentives for transitioning to low-carbon technologies ahead of the Chancellor's Autumn Statement, set to be made this week.
While recent announcements, including new exploration licenses, annual licensing, and a £20 billion funding package for carbon capture and storage (CCS), have been welcomed, concerns persist about the impact of the Energy Profits Levy (EPL) on the North Sea oil and gas industry. The EPL, currently taxing producers at 75% of profits, is seen as a significant deterrent to investment, making the basin appear "uninvestible."
The Energy Transition Survey indicates record-low confidence in the UK sector, with discretionary capital moving elsewhere due to the severity and duration of the tax. The energy industry is calling for changes to the EPL, including retaining and widening the investment allowance attached to it and adjusting the trigger price for the levy to fall away for inflation.
The requests align with a comprehensive letter sent to the Chancellor by trade body Offshore Energies UK (OEUK) in October, urging the government to create an "irresistible investment environment" through fiscal and regulatory reforms. OEUK highlighted the potential for £200 billion in energy investment by the end of the decade, with a need for renewed certainty to progress.
The wider review of the oil and gas fiscal regime, ongoing oil and gas fiscal regime review, was acknowledged by the government. Calls for a statutory body to expedite project approvals, reforms to the CfD scheme, and investment mechanisms for decarbonization and low-carbon technologies were also emphasized.
Scottish Renewables and Energy UK have joined the chorus, calling for urgent strategies to address investor confidence, reforms to windfall taxes on the electricity sector, and support for vulnerable individuals during periods of extraordinary energy prices.
These collective requests underscore the industry's call for a collaborative effort to enhance the investment environment, support low-carbon initiatives, and drive economic growth in the energy sector.