North Sea Strategy Threatens UK Energy Security

Impact of Energy Profits Levy

The UK's decision to maintain the Energy Profits Levy (EPL) at 78% is significantly impacting the North Sea oil and gas industry. This policy threatens to halve production from 74 million tonnes in 2022 to 33 million tonnes by 2030, leading to job losses and reduced public revenues.

Risks to Energy Security

Restrictive licensing and the EPL are undermining the UK's energy security, increasing reliance on imports with higher carbon footprints. The North Sea Transition Authority's forecasts highlight the urgency of addressing these issues to avoid further loss of industry expertise and energy independence.

Economic and Environmental Concerns

Domestic production is crucial for reducing exposure to global supply shocks and maintaining energy independence. Offshore Energies UK (OEUK) estimates that 7.5 billion barrels of oil and gas remain untapped in UK waters, valued at £165 billion. Relying on imports is both economically and environmentally detrimental.

Need for Tax Reform

The EPL, initially introduced to address a temporary oil price spike, is now counterproductive, with tax receipts falling from £9 billion in 2022-2023 to £4.5 billion in 2024-2025. Reforming the EPL could generate an additional £12 billion in tax receipts by 2050 and support 23,000 jobs, ensuring a stable transition to cleaner energy.

Proposed Solutions

Urgent tax reform is essential to restore investment and retain skills in the UK energy sector. Replacing the EPL with an Oil and Gas Price Mechanism could provide stable fiscal terms, capturing revenue from genuine windfalls while supporting a secure energy transition.