Offshore Energies UK (OEUK) threatens ’growing risk’ to 200,000 jobs after the UK government decision to retain a yearly levy on fossil fuel production in the North Sea
The UK’s governing Labour party chancellor, Rachel Reeves, has retained a levy on oil and gas firms operating in the UK North Sea that came into place amid historically high profit margins for big oil and gas companies in the wake of an energy upheaval caused by Russia’s invasion and ongoing war against neighbouring Ukraine.
The tax regime, known colloquially as the windfall tax, brings in billions in revenue for the UK each year, and Chancellor Reeves said the decision to keep the tax in place was the “right” one because it “continues to bring in substantial revenues based on the high profits these companies still continue to earn after Russia’s invasion of Ukraine”.
The Chancellor told Radio Scotland’s Breakfast programme, “I do believe it is right to ask those companies to continue paying a little bit more, the same tax rate that Norway applies of 78% to profits, and use that money to fund public services in Scotland.”
As part of the new UK budget, Ms Reeves announced that a replacement tax policy for the Energy Profits Levy is set to begin in 2030.
The UK’s Offshore oil and gas lobby Offshore Energy UK (OEUK) said the scheduled date for the tax change is “too late” and the decision to retain the tax will “cost tens of thousands of jobs, cripple investment, and undermine Scotland and the UK’s energy security”.
“Waiting four years for reform of this tax is too late. The North Sea continues to be one of the least competitive places for our industry in the world. We put forward a pragmatic plan: a reformed, permanent windfall tax in exchange for billions in UK investment, more tax paid, and jobs sustained. Government said no,” OEUK chief executive David Whitehouse said.
Mr Whitehouse claimed the government “turned down £50Bn (US$65Bn) of investment for the UK and the chance to protect the jobs and industries that keep this country running”.
“Instead, they’ve chosen a path that will see 1,000 jobs continue to be lost every month, more energy imports and a contagion across supply chains and our industrial heartlands,” he claimed.
Mr Whitehouse vowed to continue to push to overturn the decision.
“This is not over,” he said.
OEUK pointed to a continued need for oil and gas in the UK, despite the country’s significant renewable energy infrastructure.
“As renewables roll out, 75% of the UK’s energy still comes from oil and gas and 10-15Bn barrels are required by 2050,” Mr Whitehouse said, claiming half of the necessary volumes could be produced in the UK “with tax reform in tandem with a pragmatic approach to licensing”.
OEUK also claimed that “government policy, not geology” are to blame for a lack in exploration well drilling in 2025 and a fall in domestic oil and gas production by 40% in the last five years with further falls projected by 2030.
Despite the claims, fact checks from European Climate Foundation-funded energy and climate change policy and data analysis firm Carbon Brief showed the numbers and rationales do not necessarily add up.
“The North Sea is already in decline.
Oil production peaked in 1999, while gas production in the UK continental shelf peaked in 2000.This is why experts argue that finding alternatives to North Sea oil and gas is an energy security must, as well as a climate imperative,” Carbon Brief said in an article fact-checking prior claims around 2023 plans to ban future production of North Sea oil and gas.
Carbon Brief also cited independent UK statutory body the Climate Change Committee (CCC) in a “review of available data [which] suggested that the gradual phase-down of high-emitting sectors, such as oil and gas production, could lead to there being 8,000-75,000 workers ’whose jobs cannot continue in their current form’”.
The CCC brief “added that this would be outweighed by ’extensive job creation’. It estimated there could be between 135,000-725,000 net new jobs created by the transition to net-zero, in sectors such as renewable energy generation, retrofitting and electric vehicles. This job creation is not guaranteed and is dependent on the government implementing measures to support and upskill its workforce on the journey to net-zero,” the CCC noted.
