Britain eases opposition to new oil, gas permits, holds firm on taxes
Written by: Shadia Nasralla, Muvija M and Stephanie Kelly
LONDON (Reuters) – Britain will allow some new oil and gas production at or near existing fields, the government said on Wednesday, relaxing its stance on new licenses while dashing oil and gas producers’ hopes for an early end to windfall taxes on their sector.
At the start of the new millennium, the UK, which was a net exporter and producer of around 4.4 million barrels of oil equivalent per day (boed), similar to OPEC heavyweight Iraq, now produces around 1 million barrels, falling below 150,000 barrels of oil equivalent by 2050, according to the UK oil and gas regulator, the North Sea Transit Authority (NSTA).
US President Donald Trump has been outspoken in his criticism of Britain’s energy policy and efforts to achieve net-zero greenhouse gas emissions by 2050. Trump called on the British government to extract more oil from the North Sea and criticized the country’s “wind farms”.
The Labor government promised during the 2024 election campaign to stop issuing new oil and gas licenses to move towards net zero.
The Ministry of Energy Security and Net Zero said Wednesday’s move allows the government to issue new oil and gas licenses if they do not require new exploration and connections to existing fields and infrastructure.
WIND TAX WILL REMAIN UNTIL 2030
Presenting its budget on Wednesday, the government announced no changes to one of the world’s toughest tax regimes for oil and gas producers; This regime also includes a 38% windfall tax when prices exceed government-set thresholds, increasing the overall tax burden to 78% in such cases.
The industry was hoping for an early end to the EPL, which expires in March 2030.
“The future of North Sea energy depends on investment, which will not happen without urgent reform of windfall duties,” said David Whitehouse, chairman of industry group Offshore Energies UK.
“If the tax continues after 2026, projects will stall and jobs will disappear, no matter how pragmatic the licensing policy is.”
The government has pledged to use revenue from oil and gas to fund renewable energy projects.
While oil prices fell below the government-set threshold called the Energy Profits Tax (EPL), gas prices remained above it. Windfall tax is disabled when both fall below regularly updated thresholds.
Harbor Energy, a North Sea-focused producer, said it was disappointed by the announcement.
Environmental advocacy group Greenpeace UK applauded parts of the government’s announcement but also said it did not go far enough in supporting North Sea energy workers to find new jobs in renewable energy.
“The government has shown real global climate leadership, making the UK the world’s largest economy to start making time for new fossil fuel research,” said Areeba Hamid, co-executive director of Greenpeace UK.
The EPL will be replaced by the Oil and Gas Price Mechanism by 35% in March 2030, which will apply if oil and gas prices remain above certain thresholds, the government said on Wednesday.
(Reporting by Shadia Nasralla, Muvija M, Stephanie Kelly; additional reporting by Sam Tabariti; editing by William James, Mark Potter, Philippa Fletcher)
