UK oil industry voices concern over windfall tax

UK oil industry voices concern over windfall tax

London, 26 May (Argus) — Industry associations have raised concerns that the UK government's decision to impose a windfall tax on oil and gas profits will impact long-term investment prospects in the country's upstream sector.

The temporary 25pc tax surcharge, announced by UK finance minister Rishi Sunak earlier on Thursday, will raise £5bn ($6.3bn) "in its first year", according to the government, money that will be used to help households with soaring energy bills.

Although the government has sought to soften the burden for oil and gas producers by introducing a new investment allowance, industry lobby groups are unimpressed. The new tax will "discourage UK offshore energy investments, meaning declines in oil and gas exploration and production, and so force an increase in imports", said Deirdre Michie, chief executive of Offshore Energy UK (OEUK).

Michie said investor confidence depends on the predictability of the fiscal regime, warning that the tax change will also undermine investment in offshore wind and low-carbon energy. "They will drive away investors and so reduce UK energy production. That means less oil, less gas and less renewables," she said. "It also makes it much harder for the UK to reach net zero by 2050."

These concerns were echoed by the