The UK Government is planning the introduction of a new tax mechanism for North Sea oil and gas operators following the scheduled end of the windfall tax in 2028.
Amid the flurry of Autumn Statement papers published yesterday, the Treasury also revealed the findings of its Oil and Gas Fiscal review.
The government said the concerns of industry around a lack of stability - as articulated in several recent edition's of the Chamber's Energy Transition Survey - had been heard "loud and clear".
The review confirmed the Energy Profits Levy (EPL) will end in March 2028, or earlier if prices fall below the Energy Security Investment Mechanism (ESIM) levels, set at $71.40 per barrel of oil and £0.54 per therm of gas.
However, the review states that to “ensure a fair return for the nation at times of unusually high oil and gas prices” the government will develop a new mechanism which could be used to respond to market price shocks post-2028.
The government will ensure the introduction of any new mechanism happens “in a more predictable way” in order not to deter investment.
Included in the review are a set of principles for supporting investment which will inform the development of a future tax
response to price shocks.
Oil and gas tax revenues include offshore corporation tax, petroleum revenue tax (PRT) and the EPL, which together place a 75% tax on North Sea profits until the end of March 2028.
Responding to the measures outlined by the Treasury, PwC UK energy and infrastructure tax partner Colin Smith said oil and gas businesses will welcome the confirmations relating to the EPL in the review and the removal of tax barriers related to energy transition activities.
“But the industry’s enthusiasm may be dampened by the proposals for a new mechanism,” he said.
Click here to read the review document.