The government currently plans to increase windfall taxes on oil and gas profits from 75% to 78%, extend the tax until 2030 and abolish tax incentives for further investment.
In the letter, issued by Offshore Energies UK, firms express concern that reduced investment and greater uncertainty would be felt throughout the supply chain “through jobs, and the communities this industry supports, both directly and indirectly.”
They also argue that oil and gas revenues are helping fund investment in renewable energy.
A hostile tax environment would threaten not only the oil and gas industry, but also the firms who invest in renewable energies using cash generated through fossil fuels, the letter suggests.
“The companies investing in nascent opportunities like floating offshore wind and carbon capture and storage will require the cashflow from a stable and predictable oil and gas business to fund these opportunities,” it says.
“Sufficient investment in the UK energy transition can only happen if we support, not undermine our domestic oil and gas sector.”
The new government’s plans to increase and extend windfall taxes while reducing investment allowances was clear in the Labour manifesto.
But the offshore energy industry had hoped for a consultation with the new government and are calling for a role in its industrial strategy council.
The letter says those across the energy industry look at current proposals with “grave concern that these would be a blunt response which could undermine the levers to long term solutions and jeopardise jobs in communities across the UK.”
A windfall tax of 78% would bring the UK in line with Norway but energy industry officials insist that Norway has had a much more stable tax and regulatory regime, which also offers generous incentives for investment.
The previous Conservative government imposed two tax hikes on UK oil and gas profits – raising them to 65% and then 75% in response to soaring energy prices following Russia’s invasion of Ukraine.
Last May, Harbour Energy, the UK’s largest oil and gas producer, told staff it would cut 350 UK jobs, blaming the UK government’s windfall tax changes.
A Treasury spokesperson said that it is “strengthening the previous government’s windfall tax to ensure North Sea oil and gas producers contribute their fair share towards our energy transition.”
“Our plans for a new National Wealth Fund and establish Great British Energy will create thousands of new jobs in the industries of the future,” they added.
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