UK's Windfall Tax Hike: Boon for Renewables, Bane for Oil & Gas?

Britain's Labour government announced a 3% increase in the Energy Profits Levy to 38%, scrapping the investment allowance and extending it to 2030. This decision aims to fund the transition to renewables but is expected to discourage North Sea oil and gas investments, potentially hastening the basin's decline.

Britain's Labour government has announced a substantial increase in the Energy Profits Levy (EPL), raising it by 3% to 38%, which brings the overall tax rate on oil and gas activities to an imposing 78%. This policy change, slated to start on November 1, also abolishes the levy's investment allowance and extends its duration to March 2030.

The government asserts that these measures will compel oil and gas companies to contribute more towards the UK's clean energy transition. A dedicated state-backed power company, GB Energy, has been established to boost the country's renewable energy capacity with a goal to decarbonize by 2030. However, industry figures warn that this move could result in a precipitous decline in investments within the North Sea basin.

Executives like Francesco Mazzagatti of Viaro Energy and David Latin of Serica Energy are criticizing the government's approach, calling it detrimental to both energy security and net-zero goals. The lack of sector consultation has also been a major point of contention. Despite these challenges, Viaro continues its expansion, announcing the purchase of Southern North Sea assets from Shell and Exxon Mobil.

(With inputs from agencies.)