The North Sea oil and gas industry trade body Offshore Energies UK has requested that the government eliminate the current windfall tax on fossil fuel producers ahead of schedule and implement a narrower alternative based on price thresholds.
The existing energy profits levy was established in 2022 following record profits posted by oil and gas companies when energy prices surged after Russia’s invasion of Ukraine. OEUK proposes replacing this with an oil and gas revenue levy set for 2030 to instead take effect in 2027. Under the proposed alternative, companies would face a 35% tax on revenue only when prices exceed predetermined levels. The industry argues this revised approach would encourage investment while maintaining taxation during price spikes.
The timing of this request coincides with expectations of elevated household energy bills this winter, with wholesale gas prices recently reaching their highest levels since the Ukraine crisis began. Energy bills are projected to climb to three-year highs, intensifying pressure on British households. Companies including Shell and BP have reported substantial profits in recent months following geopolitical tensions affecting global energy markets.
OEUK also seeks government approval for two major North Sea projects, Rosebank and Jackdaw, and broader regulatory flexibility for the sector. The group contends that accelerating the tax transition would catalyze up to £50 billion in North Sea investment and generate up to £14.9 billion in additional tax revenue over the coming decade, though only £2.4 billion would derive from levies on oil and gas companies themselves. OEUK argues the remaining projections reflect tax revenues from employment the increased investment would create.
Opposition to the industry’s proposals has emerged from environmental and social advocacy organizations. Greenpeace and other groups have called for strengthening rather than weakening windfall taxes to fund cost-of-living assistance for struggling households. A decision on the Jackdaw project approval has been delayed pending the outcome of a byelection scheduled for next month.
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