Pressure is mounting on the UK Government to move to its new North Sea tax regime amid growing concerns about jobs and energy security.
Aberdeen North MP Kirsty Blackman has challenged the Prime Minister to confirm when a new tax mechanism for the North Sea oil and gas sector will be introduced, while Ineos founder Sir Jim Ratcliffe has warned that the UK must prioritise domestic energy production as conflict in the Middle East drives up global prices.
The intervention from Ms Blackman comes just days after Chancellor Rachel Reeves indicated she wanted to bring the current Energy Profits Levy to an end earlier than planned and move to a new fiscal framework designed to unlock investment in the basin.
Speaking in the House of Commons, Ms Blackman warned that the current tax regime was holding back investment and creating uncertainty for workers and companies across the sector.
She said: “The UK Government tax on Scotland’s energy is holding back investment. Despite months of refusing to do so, the Chancellor has finally said she is committed to change.
“So will the Prime Minister confirm to the House today when the new Oil and Gas Price Mechanism will be introduced to provide certainty for jobs, investment, and crucially, energy security?”
The UK Government has proposed replacing the temporary Energy Profits Levy with a permanent Oil and Gas Price Mechanism, designed to apply higher taxes when prices spike while allowing investment during more stable market conditions.
However, the measure has not yet been legislated and is currently not expected to come into force until 2030, creating continued uncertainty for the industry.
Responding in the Commons, the Prime Minister did not give a timeline for the new regime and instead highlighted the role of nuclear power in the UK’s future energy mix.
He said: “We all want certainty for energy security, and oil and gas will be part of the mix for many years to come. I remind the hon. Member that 70,000 jobs were lost under the SNP and the Conservatives in the last decade.
“We want energy security, and we see new nuclear as part of that. What does the SNP do? It blocks that.”
Following the exchange, Ms Blackman said delaying the new mechanism would only deepen uncertainty for the sector.
She said: “Government has designed a permanent windfall tax, in conjunction with industry, that is ready to go – to protect us from price shocks like we’re currently experiencing and allow for investment under more normal conditions. The chancellor says she wants the new tax to come into effect.
“The North-east of Scotland urgently needs clarity from the UK Government to unlock investment and safeguard Scotland’s energy security and protect jobs and must tell us when the mechanism will be put in place.”
Her comments follow a meeting earlier this month between the Chancellor and leading oil and gas operators in London, where Rachel Reeves signalled she wants the Energy Profits Levy to end next year — three years earlier than planned — and move to the new price-triggered regime.
Industry leaders told ministers that billions of pounds of investment could be unlocked if the levy was replaced with the proposed Oil and Gas Price Mechanism and long-term fiscal certainty was provided.
Meanwhile, pressure is also mounting from business leaders to strengthen domestic energy production in response to rising geopolitical tensions.
Writing in The Telegraph, Ineos chairman Sir Jim Ratcliffe said the conflict in the Middle East should prompt the UK Government to rethink its approach to the North Sea and prioritise energy independence.
He wrote: “Nothing is more important for national security than energy independence.”
Sir Jim called on Energy Secretary Ed Miliband to approve new developments such as the Rosebank and Jackdaw fields and allow further exploration in the basin.
He said: “Without reliable energy in a conflict situation, running hospitals, transportation, manufacturing and basic essentials like heating and lighting are jeopardised.
“Our strategic defence capability is totally undermined just when we need it most. Without a reliable supply of energy, the country is crippled.”
The industrialist also warned that declining investment could lead to a sharp drop in domestic production over the coming years.
He wrote: “The disruption in the Strait of Hormuz should be a wake-up call ... Britain is choosing to import energy rather than produce it.”