Stormy seas ahead for North Sea oil and gas as Chancellor increases windfall tax on income

Oil and gas companies in the North Sea came under fire yesterday when the Chancellor increased the windfall tax on profits.

The so-called energy profit tax will be increased from 35 percent to 38 percent from next month, bringing the nominal tax rate for producers to 78 percent.

The tax – introduced by the Tories in response to rising energy prices following Russia’s invasion of Ukraine – will be extended until 2030.

And Rachel Reeves has abolished the investment allowance, which allows companies to offset tax on capital that is reinvested.

A spokesperson for North Sea oil and gas company Serica Energy said the tax level was “fundamentally inappropriate” and “does not reflect that the windfalls are long gone.”

Harbor Energy, Britain’s largest oil and gas producer, said: ‘The tax on energy profits creates an environment of windfall taxation without the associated windfall prices.

“We urge the government to review the fiscal regime well before 2030.”

Maurizio Carulli, an analyst at asset manager Quilter Cheviot, said the changes would “hamper energy companies’ investments.”