Rachel Reeves has told oil and gas operators that she wants to end the Energy Profits Levy next year – three years earlier than planned.
The Chancellor held crunch talks with industry bosses in London yesterday, where she revealed that she had planned to announce an end to the levy this week, prior to America’s actions in Iran.
She has now instructed Financial Secretary Lord Livermore to work with the sector to provide “long-term financial certainty”, as well as certainty on a 2027 shift to a new North Sea tax regime which could unlock investment.
Reeves met representatives from the oil and gas industry - including BP, Adura, Neo Next, Harbour Energy, Ithaca Energy, Serica and EnQuest - at No11 Downing Street on Wednesday afternoon.
The meeting was described as positive, with the Chancellor and industry leaders agreeing on their shared agenda of supporting jobs, investment and economic growth.
Commitment
The Chancellor reaffirmed her commitment to backing Britain’s oil and gas industry, recognising its role in supporting jobs and economic growth in communities – particularly in Scotland – during the transition to a lower-carbon energy system.
According to a Treasury readout, Reeves stressed that domestic oil and gas would continue to play a role in the UK’s energy mix for decades to come.
She also told industry leaders that she had instructed the Financial Secretary and officials to work with the sector on two immediate priorities: providing long-term financial certainty and working collaboratively with operators to navigate a period of geopolitical and price volatility.
After the meeting, a Treasury source said: “The Chancellor was clear with industry that she wants the Energy Profits Levy to come to an end. She has made that promise and she stands by it. Indeed, it was a commitment she wanted to make this week. But the crisis in the Middle East has had real-time consequences on oil and gas prices and it is right that we respond to this.”
The meeting followed several weeks of discussions between the Treasury and operators, instigated by government, during which industry tabled an offer to invest billion of pounds if the levy was replaced by the government’s proposed successor regime, the Oil and Gas Price Mechanism.
'Government must act now'
Responding to the meeting, Aberdeen & Grampian Chamber of Commerce welcomed the Chancellor’s comments but urged ministers to move quickly to unlock investment.
Russell Borthwick, Chief Executive, Aberdeen & Grampian Chamber of Commerce, said: “We welcome the Chancellor’s recognition that the EPL must come to an end now, something the Chamber has consistantly called for. Events in the Middle East strengthen, not weaken, the case for change
“The offer on the table was billions of pounds worth of investment, which can be unlocked overnight if the right fiscal and regulatory conditions are in place.
“For the thousands of companies and tens of thousands of workers who depend on the UK oil and gas industry, that investment would support jobs, strengthen supply chains and reinforce the UK’s energy security at a time of growing global uncertainty.
“There has never been a more important, more urgent moment to back the North Sea and invest in domestic production. It is now incumbent upon the Chancellor to create the fiscal and regulatory environment which would allow these companies to invest.
“The Energy Profits Levy has left the UK exporting jobs and importing oil and gas from volatile regions. Moving to the Oil and Gas Price Mechanism can change that trajectory, but it’s up to the UK Government to act now.”
Octopus boss calls for action
Meanwhile, the boss of Britain’s biggest gas and electricity supplier has called on Ed Miliband to reopen the North Sea to strengthen the country’s energy supplies.
Greg Jackson, the founder and chief executive of Octopus, urged the Energy Secretary to exploit Britain’s own fossil fuel reserves after war in the Middle East triggered higher oil and gas prices on global markets.
Writing for The Telegraph, he warned that Britain is “staring down the barrel” of another energy crisis.