Approximately 500 million barrels of oil-equivalent are predicted to be left in the ground in the next decade by UK North Sea oil and gas producers, according to an industry body.
A statement from Offshore Energies UK (OEUK) said on Tuesday that the equivalent of one year’s output will remain in the ground due to windfall tax hikes.
In recent years the UK government has introduced higher windfall taxes on profits from oil and gas as well as renewables, including the Energy Profits Levy introduced in May 2022. Industry officials have said that these taxes could stifle investment and could lead to higher dependence on energy imports.
OEUK predicts that the taxes will result in a reduced investment of between $3.67bn and $6.12bn (£3bn and £5bn). This comes despite tax incentives of approximately 91 pence per pound spent on new hydrocarbon production.
OEUK market intelligence manager Ross Dornan said on Tuesday: “when we talk about investment in the UK oil and gas resources, it’s not about exponential growth, it’s about managed decline”.
Last year the British North Sea produced just under 1.4 million barrels of oil equivalent per day. The UK energy mix in the same year was made up of 76% oil and gas. The UK has been a net importer of oil and gas since 2004.
The UK government is expected to announce new energy security measures by the end of this month. This may include changes to the Energy Profits Levy tax, often referred to as the “windfall tax”.
“In addition to the measures in the spring budget, the government will set out further action later this month to ensure energy security in the UK and meet our net zero commitments” the UK government said in a document released at the time of its spring spending announcements .