INTERVIEW: SNP calls for end to UK's windfall tax, 'ideological' energy policies

The UK government should scrap its contentious windfall tax on oil and gas losses to prevent "tens of thousands" of job losses by 2030, the Scottish National Party's energy spokesman Graham Leadbitter told Platts, adding that the policy has "passed its sell-by date" and is failing to meet its own revenue aims.

Leadbitter said the Energy Profits Levy -- under which the headline tax rate for North Sea producers is now 78% -- had pushed business costs so high that energy producers are either withdrawing from the basin or cutting output, creating a tax take "cliff edge" for the Treasury.

That, in turn, is fueling concerns over energy security, import-dependence and job losses, the MP told Platts in an interview March 3 -- a day after Qatar halted LNG production amid worsening conflict in the Middle East.

"We can't allow the North Sea to decline at a pace that outpaces our reliance on imported oil and gas. That's pointless," he said. "Why would we want to put ourselves in a position of importing from countries [with weaker environmental and safety standards]."

The EPL was introduced in 2022 by the Conservative government after Russia's invasion of Ukraine spiked gas prices but was increased and extended by Keir Starmer's Labour government.

The Treasury has announced plans to replace it with an oil and gas price mechanism in or before 2030 -- which would kick in at far higher prices -- but industry players continue to demand prompter action amid waves of divestment and consolidation in the North Sea.

The UK government has also banned new exploration licenses in the basin and is yet to approve two key oil and gas projects -- Shell's Jackdaw and Equinor's Rosebank -- which were due to start production by 2026 and 2027 respectively.

UK North Sea crude and NGL production has been in steep decline, averaging just 632,000 b/d last November, according to provisional figures from the Department of Energy Security and Net Zero. In 2009 output was around 1.6 million b/d.

The UK's crudes, including the Brent grade, underpin Platts Dated Brent benchmark, which was last assessed at $84.87/b on March 3, having risen sharply this week on the conflict in the Middle East.

Gas production meanwhile has dropped from 73 Bcm in 2008 to 31 Bcm in 2024, according to DESNZ figures. That meets only a third of UK demand, leaving the country dependent on imports and vulnerable to supply shocks.

Platts, part of S&P Global Energy, assessed the JKM LNG benchmark for April at $25.39/MMBtu on March 3, up from $10.70/MMBtu on Feb. 27 before the US and Israel launched their attack on Iran.

'Ideologically-driven'

Leadbitter said Ed Miliband, the energy secretary, was driven by ideology rather than pragmatism.

"I think he is very ideologically driven and wants oil and gas production in the North Sea to end. That's what it comes across as. That's not good enough, that's not a transition, it's not just, it's not reasonable."

As a result, "there's a potential for it to do to communities in the northeast of Scotland what [former prime minister Margaret] Thatcher did to mining communities and steel communities in the 1980s," he said.

More practically, the SNP MP said the EPL has "pushed the cost of doing business so high so [operators] are either withdrawing from doing business or they are selling less product and the consequence of that is lower tax take for the Treasury."

Treasury officials have reportedly been at odds with Miliband in recent months over the EPL. Late last year, the Treasury announced it would issue permits for tie-back projects to increase output at existing oil fields.

A Treasury spokesperson told Platts in a recent statement: "We are also making sure the North Sea has a prosperous and sustainable future through record investment that helps deliver the next generation of skilled jobs while growing the clean energy industries of the future."

North Sea meeting

Delivering her Spring statement in parliament on March 3, finance minister Rachel Reeves said she was set to meet "North Sea industry leaders" on March 4.

"Given where we are, the first thing she should do is get rid of those taxes on North Sea oil and allow us to start exploiting those opportunities," Mel Stride, the opposition Conservative Party's finance spokesman, said in his riposte.

It also comes two days after eight former UK energy ministers implored the government to curb taxes and burdensome regulation on oil and gas producers on energy security grounds.

"The premature curtailment of domestic production is not primarily the result of geology but of policy decisions made by both Labour and Conservative governments," they said in a letter to Starmer.

Managed transition

Leadbitter said the SNP supports a balanced energy transition from hydrocarbons to renewables "as quickly as practically possible", noting that such a shift would require continued oil and gas extraction.

He also expressed concerns over infrastructure degradation and the loss of talent from northeast Scotland, which will be required for green energy, noting continued demand for engineers in the Gulf of Mexico, Guyana, Nigeria, India and elsewhere.

And while Scotland -- which is already self-sufficient in energy -- can be a leader in hydrogen, sustainable aviation fuel, biogas and other energy sources, Leadbitter said it was being held back by the UK government's "lack of pace", including when it comes to project approvals and grid and renewables investments.

He cited uncertainties around the participation of Scottish projects in the UK's Allocation Round 8 renewable energy auction and decision-making delays on a potential Chinese wind turbine manufacturing investment at Ardersier.

"The SNP has had a strong position that we must invest more heavily in renewables to drive that transition," Leadbitter said.

"The problem is those things are not happening. If you are going to be ideological about something, you have to throw a lot of money at it to make it work."