No petroleum tax changes in UK budget

March 16, 2023

Industry association Offshore Energies UK (OEUK) has voiced its disappointment at yesterday’s Spring Budget statement by UK Chancellor Jeremy Hunt.

Offshore staff

LONDON – Industry association Offshore Energies UK (OEUK) has voiced its disappointment at yesterday’s Spring Budget statement by UK Chancellor Jeremy Hunt.

There was a lack of recognition for domestically produced oil and gas as the key pillar in UK energy security, OEUK said.

More than 90% of the association’s operator member companies are looking to scale back investment in UK offshore activity due to the government’s Energy Profits Levy.

OEUK did acknowledge Hunt’s new support for carbon capture and storage (CCS) developments (£20 billion/$24.1 billion).

The newly announced capital allowances for the wider economy could encourage more private investment into the UK, but there needs to be targeted encouragement of the private investment needed across the entire energy landscape, the association added.

Offshore Energies UK named industry veteran David Whitehouse its new CEO in December 2022.

Prior to the budget, OEUK CEO David Whitehouse had written to Hunt requesting support for investment in projects and new technologies for decarbonization and CCS; the introduction of a long-term predictable and attractive fiscal and regulatory regime; and an amendment to the Energy Profits Levy, so that it only applies when profits surge.

Whitehouse commented that the actual budget statement “offers some helpful support for our emerging technologies, but we are disappointed that it has not removed obstacles for offshore energy firms and the home-grown oil and gas producers keeping the nation’s lights on.

“It is vital that HM Treasury offers investors fiscal predictability and regulatory certainty making the UK an attractive place to invest for the long-term. We need the government to take a far-sighted approach focused on reducing investment risk if we are to build a secure, affordable, low-carbon energy market in the UK.”

As for Hunt’s commitment on CCS, “this type of initiative is exactly what will help the UK and its supply chain pivot and position as a world leader in this low-carbon opportunity,” Whitehouse said. “The government should now speed up the progression of all CCS projects, including introducing additional licensing rounds for storage sites.”

Today the government announced it would offer £205 million ($247.3 million) for its fifth Contracts for Difference (CfD) scheme in its latest renewables auction. This is a mechanism for supporting new low-carbon electricity generation projects, so far awarding contracts to projects totaling nearly 27 GW of low-carbon capacity.

The funds offered include £170 million ($205 million) for established technologies such as offshore wind and a £10 million ($12.06 million) ring-fenced budget available for tidal stream technologies.

The competitive nature of the CfD scheme has helped lower energy prices, the government claimed. When wholesale electricity prices are higher than the price agreed in the CfD, generators pay back the difference, and this is passed on to energy suppliers, leading (hopefully) to lower bills for consumers.

03.16.2023