STV News“At least the conversation is happening now”.
That’s what one industry source said to me on the back of the opening of not one, but two new consultations around the North Sea.
In truth, the conversation around the future of the North Sea has been ongoing for some time.
However, with the announcement of the two consultations, perhaps we’ll start to get into the weeds of the issue.
The UK Government has announced the windfall tax, or Energy Profits Levy (EPL) as it’s officially known, will come to an end in March 2030.
That’s welcome news to the industry which has long warned of the damage it says the tax is doing to investment.
The Office for Budget Responsibility (OBR) said in October it expected capital expenditure in the industry to fall by 26%.
The windfall tax has had some history.
First introduced in 2022 after rocketing wholesale energy prices driven by Russia’s invasion of Ukraine, it was initially set at 25% and was due to end this year.
It was a tax on the increased profits that oil and gas operators were making.
It was then increased to 35% under the Conservatives and extended until 2029.
When Labour entered Government, it increased further to 38% and for another year until 2030.
The levy has brought in a lot of money too.
UK Government figures show between 2023 and 2024 the tax brought in £3.6bn.
Those same figures though show overall revenue from oil and gas were £6.1bn in the same year, down from £9bn the year before.
The OBR predicts corporation tax and the energy profits levy will bring in £4.5bn in 2024-2025 but fall to just £2bn by 2029 – 2030.
But, if the sector thought 2030 would mean back to the old tax regime, they’ve had a rude awakening.
The UK Government is now consulting on which type of tax should replace it.
Ultimately, the aim of whichever option is chosen will ensure if high wholesale prices happen again, then there will be a tax there ready to go.
The UK Government says it will also provide clarity and certainty to the industry because they’ll know what they can expect.
The other consultation is on the future of the North Sea, what to do with the assets there, how to grow greener energy such as wind and hydrogen.
However, it also makes clear that new oil and gas licences will not be granted.
It sets out how the Government intends to define both a “new field” and a “new licence”.
Unusually, both sides of the debate on oil and gas, the industry and environmental groups, have broadly welcomed these consultations.
Finding agreements clearly depends on which part you focus on.
Greenpeace have called the move “a world leading commitment”.
Aberdeen and Grampian Chamber of Commerce said: “North Sea operators have eight weeks to secure a stable future.”
The consultations don’t last long.
One will close at the end of April, the other at the end of May.
That might mean action could happen quickly.
The issue is that until then this provides no clarity.
Consultations are all well and good, the Government have had several for the energy sector since they came to power last summer.
It’s what comes after them that everyone desperately wants an answer to.
Right now, budgets are being crafted, investment decisions are being made and ultimately jobs are on the line.
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