UK Extends Windfall Tax as It Clears a Path for Limited North Sea Drilling

Group 1 - The UK government has decided to approve new oil and gas production in the North Sea, allowing output from existing fields and nearby areas, while maintaining the windfall tax until 2030 [1] - The energy industry has expressed concerns that the windfall tax will deter investment in domestic energy supply, which is crucial for reducing reliance on imports and addressing high electricity prices [2][3] - Offshore Energies UK's chief has emphasized that the future of North Sea energy relies on investment, which is unlikely to occur without reform of the windfall tax, warning that projects may stall and jobs could be lost if the tax remains beyond 2026 [3] Group 2 - Since the introduction of the Energy Profits Levy (EPL) in 2022, oil and gas companies have sought regulatory and tax certainty, but recent policy changes and increased taxes have led to a decline in North Sea investments [4] - The Labour government's increase of the windfall tax and removal of the 29% investment allowance has resulted in a significant drop in production and exploration drilling, with UK oil and gas production decreasing from approximately 4.4 million barrels of oil equivalent daily 25 years ago to about 1 million barrels daily currently, projected to fall to as low as 150,000 barrels by 2050 [5]