UK weighs early end to North Sea windfall tax amid talks with oil and gas producers
(Bloomberg) – The UK Treasury is considering scrapping a windfall tax on North Sea oil and gas following persistent pushback from producers, according to a person familiar with the matter.
Ministers have been holding meetings with industry representatives to explore the impact of ending the Energy Profits Levy before it expires in 2030, according to the person, who asked not to be identified discussing private deliberations.
The discussions come as the governing Labour Party seeks to balance ambitious climate goals with energy security and jobs. It’s contending with the rise of Nigel Farage’s Reform UK, which has pledged to scrap the EPL should it win power, while the Greens want the tax to be made permanent. The Scottish National Party has said the levy threatens tens of thousands of North Sea jobs.
Talks on ending the tax early have been going on for months, but the Treasury decided against including any change in November’s Autumn budget, the person said. The decision ultimately rests with Chancellor Rachel Reeves.
The deliberations were first reported by Upstream, which said the Treasury had held meetings with North Sea operators ahead of Reeves’ Spring Statement, due next week. People familiar with her thinking said the chancellor isn’t due to announce any new policies.
Read more: North Sea at risk unless UK ends windfall tax, industry veterans warn
The tax was introduced by the previous Conservative government after Russia’s invasion of Ukraine triggered a surge in energy prices. Prices have since declined, but the levy has been extended and increased several times, pushing the industry’s headline tax rate to 78%. Lobby group Offshore Energies UK has consistently pressed for change.
Price thresholds
Under current rules, the tax remains in place through March 2030, but it can end sooner if six-month average prices for both oil and gas fall to certain levels set by the Energy Security Investment Mechanism, a fiscal safeguard introduced alongside the levy to prevent it from stifling investment. For the 2026-2027 financial year, those thresholds are $78.65 per barrel of crude and 61 pence per therm of gas.
“We’re giving the sector and its investors the long-term certainty to plan, invest and support jobs with plans to replace the Energy Profits Levy when it ends by 2030, or earlier if its price floor is triggered,” the Treasury said. “We are also making sure the North Sea has a prosperous and sustainable future through record investment that helps deliver the next generation of skilled jobs while growing the clean-energy industries of the future.”
Grid manager National Gas Transmission Plc said this month the government needs to study ways to “optimize” remaining UK production, “where economically and environmentally appropriate.”
That followed a warning from the state-owned National Energy System Operator late last year, which said reducing domestic gas output — and boosting reliance on fuel imports — would make the UK more vulnerable and increase the risk of unexpected disruptions in the coming years.
