UK pushes ahead on North Sea oil and gas tax hike, timeline extension

The new UK government on July 29 unveiled plans to increase the headline tax rate on North Sea oil and gas revenues by 3 percentage points to 78% from Nov. 1, remove investment allowances under the Energy Profits Levy, and extend its duration by a year.

The increase in the EPL and removal of EPL allowances had been trailed in the Labour Party's election manifesto, however, the urgency of its introduction, and extension of the timeline to March 31, 2030, was less clear, with the announcement preceding a national budget statement scheduled for Oct. 30. Industry body Offshore Energies UK denounced the measures as a blow to industry confidence and a threat to some 200,000 UK jobs.

"Money raised from these measures will support our clean energy transition, increasing security, and providing sustainable jobs for the future," the government said, adding that "after a period of change" it would consult with the industry on the long-term future of oil and gas taxation.

UK oil output is 77% below its 1999 peak, following a 12% fall in 2023, with output in Q1 2024 averaging 680,000 b/d, including natural gas liquids. Total UK oil output is less than that from Norway's single highest producing field, Johan Sverdrup. UK gas output has fallen by some 71% from peak levels.

Several companies had suspended plans for investment in new oil and gas projects to await certainty on Labour policy, including a separate pledge to end new oil and gas license issuance.

"These announcements have been made without meaningful engagement with this sector," OEUK chief executive David Whitehouse said. "We recognize the government has significant spending challenges to manage, but today's announcement will only serve to rock confidence further."

A number of UK crude oil grades contribute to Platts North Sea Dated Brent price assessments, although the assessment process has been updated to include Norwegian and US crude oil grades.

Dated Brent was last assessed by Platts at $81.25/b on July 26. Platts is part of S&P Global Commodity Insights.