- US-based firm Apache will exit the North Sea by 2029 due to the financial strain of the windfall tax.
- The government plans to make the North Sea a leader in offshore clean energy, insisting that no new licences for oil exploitation will be issued.
The UK government has launched a consultation on replacing the Energy Profits Levy (EPL)-commonly known as the windfall tax—when it expires in 2030, signalling a shift in the country’s energy taxation strategy.
The EPL, introduced in May 2022, is in response to record profits posted by oil and gas companies following surging global energy prices. Initially set at 25%, the tax was later increased to 35% by former Chancellor Jeremy Hunt, extending its duration until at least 2029.
The current chancellor, Rachel Reeves, increased it by 3% in October 2024, pushing the expiration date to 2030. Under this framework, North Sea oil and gas producers currently pay a headline tax rate of 78%.
As energy markets stabilise, the government seeks input on a new tax mechanism that would only be triggered when energy prices or company profits reach exceptionally high levels. The Department for Energy Security and Net Zero stated that the goal is to ensure a “fair return for the nation during times of unusually high prices.”
The consultation also raises questions about the long-term future of oil and gas production in the North Sea, as the government confirmed that no new exploration licences would be approved. While existing fields will continue operating, Energy Secretary Ed Miliband emphasised that the North Sea remains crucial to Britain’s energy transition.
“For decades, its workers, businesses, and communities have helped power our country. Oil and gas production will continue to play an important role, but as the world transitions to clean energy, the North Sea must also drive that transformation,” Miliband stated.
However, some companies have started reconsidering their long-term investments. US-based firm Apache announced it would exit the North Sea by 2029, citing the financial strain of the EPL as making operations in the region “uneconomic.”
The tax increase had already raised concerns among industry leaders, with Offshore Energies UK (OEUK) warning that it could stifle investment in the sector.
The government has reaffirmed its commitment to making the North Sea a leader in offshore clean energy, working alongside the oil and gas sector, trade unions, and other stakeholders on a phased transition plan.
While Energy Minister Michael Shanks insisted that his administration would not issue new licences, he declined to confirm whether oil found near existing fields could be exploited, leaving room for potential legal and regulatory debates.
With energy markets evolving and the UK focusing on cleaner alternatives, the next few years will determine whether the North Sea can successfully balance fossil fuel production with its ambition to become a global hub for renewable energy.