Oil firm Apache blames windfall tax for planned North Sea exit by end of 2029

Oil firm Apache has announced it will end its North Sea production by the end of 2029, blaming the windfall tax.

The US business said the recent budget announcement confirming changes to the Energy Profits Levy (EPL) would make production “uneconomic”.

The windfall tax increased by 3% to 38% on November 1 and was extended for a further year until the end of March 2030.

The chancellor confirmed the move in the recent budget on October 30.

In a statement, Apache said: “The onerous financial impact of the EPL, combined with the substantial investment that will be necessary to comply with regulatory requirements, makes production of hydrocarbons beyond 2029 uneconomic.

“Looking forward, our focus will be on maintaining asset safety and integrity as we prepare for the responsible decommissioning of our assets.”

Apache took control of the iconic Forties field in 2003 but last year announced it would suspend drilling in the North Sea and cut jobs in response to the windfall tax.

The recent announcement around the levy means that overall tax on oil firms sits at 78%.

However, it did keep some of the allowances in the tax, something the industry had fought hard to maintain.

In response to the decision by Apache, a UK Government spokesperson said: “We are committed to making the UK a clean energy superpower, with both public and private investment required to support the transition, enhance energy security, and provide sustainable jobs of the future.

“To that end we secured £24bn for green industries at the International Investment Summit and have made changes to the Energy Profits Levy that recognise the oil and gas sector’s role in the UK’s energy mix while asking it to contribute more to the transition – helping to fund GB Energy based in Aberdeen.”

However, business groups say they have warned of the impact of the windfall tax for years.

Ryan Crighton from Aberdeen and Grampian Chamber of Commerce said: “For close to two years now, we’ve been warning that the windfall tax would drive investment away from the North Sea and you’re now seeing it in action.

“In the last ten days we’ve had Harbour Energy announcing plans to sell fields, we’ve now got Apache looking to accelerate decommissioning of a key field in the North Sea.

“What more do government need to see and hear to realise the windfall tax is causing huge damage to the North Sea.”

The industry body described the news as a “worrying development”.

An Offshore Energies UK spokesperson said: “This is a worrying development and demonstrates the impact of so many difficult fiscal changes in recent years.

“The chancellor confirmed in her Budget speech that the Government will consult in early 2025 on a successor oil and gas tax regime that embeds a response to changes in the oil price.

“This is the opportunity for industry to show a different path with a progressive fiscal regime that unlocks investment, creates value in the economy, helps grow our supply chain capabilities, and supports jobs.”