UK Eases Oil and Gas Licensing Restrictions, Extends Windfall Tax

The UK government has announced it will allow new oil and gas production on or near existing fields while maintaining windfall taxes until 2030. The move comes despite previous Labour government promises to halt new oil and gas licenses. Changes include a shift to a 35% Oil and Gas Price Mechanism.

The UK government has decided to permit new oil and gas production on or near existing fields under certain conditions, despite prior pledges to end new licenses. This decision was revealed on Wednesday, crushing industry hopes of an early termination of windfall taxes.

The Department for Energy Security and Net Zero confirmed the government would issue new licenses provided they do not necessitate fresh exploration and can tie back to existing infrastructures. The announcement confirmed that the stringent 78% tax, including a 38% windfall tax, would remain.

The government also announced adjustments to the Energy Profits Levy (EPL), which will conclude in 2030, transitioning to a 35% Oil and Gas Price Mechanism. This mechanism will apply if both oil and gas prices surpass established thresholds, continuing the heavy taxation burdens on producers.

(With inputs from agencies.)