What’s Next for the North Sea Oil and Gas Industry

Fearing higher taxes and tougher environmental regulations, North Sea producers have put investment on hold until this month’s Budget - are things as bad as they look for the sector?

It’s October, and this year’s unusually important Budget, the first to be delivered by the new Labour government, is looming into view.

The statement, due on 30 October, is particularly critical for the UK’s beleaguered oil and gas industry. The new government’s agenda is still shifting into focus, but it has been clear enough on following through Labour’s election pledge to move away from oil and gas to renewable energy.

Ministers have already announced that the Energy Profits Levy (EPL), a windfall tax imposed on oil and gas groups by the previous administration after commodity prices surged in the wake of the war in Ukraine, will rise by 3pc to 38pc, increasing the total tax burden on North Sea producers to 78pc.

Energy minister Ed Miliband has confirmed the party’s plan to stop issuing new oil and gas exploration licences for new fields. And the industry is now bracing itself for the possibility that the Budget could tighten capital expenditure and investment allowances. Labour’s manifesto declared an intention to close ‘unjustifiably generous’ tax loopholes, and to raise an extra £6bn in taxes from the sector over the next five years.

There are further worries about the unfolding implications of the Finch ruling, a landmark Supreme Court adjudication in June opening the way for a wave of fresh legal challenges against new fossil fuel projects. Named after the activist and writer Sarah Finch who helped bring the case, the ruling requires regulators to take into account so-called ‘Scope 3’ emissions when granting licences for new ventures - carbon emitted not only by producers themselves, but also by consumers when the product is used.