REVENUES from Scotland’s offshore oil and gas assets have reached their highest levels in 25 years thanks to the windfall tax, but industry is warning that any short-term gain will be detrimental to the industry’s future.
The new analysis from accountancy firm RIFT comes as figures show the Energy Profits Levy (EPL) contributed to more than £4bn of the £9.4bn in revenues for the Scottish economy during the 2022/23 financial year.
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That compares to total revenues of £2.45bn the year prior, itself a 225% uplift on the year before that.
RIFT’s managing director, Bradley Post, claims: “tax paid is far better off benefitting the Scottish economy than it is sitting in the back pockets of energy provider execs,” but his comments come amid a number of industry experts warning that future tax receipts will be hit substantially due to current policy.
A number of the countries largest producers have said the UK’s current tax regime is driving them to cut investment.
In March, EnQuest reported a loss for the first half of 2023, blaming the EPL.
That was a day after Ithaca Energy said the tax led them to “delay or cancel” projects in the UK’s basin.
Harbour Energy has cut hundreds of jobs from Aberdeen, and reported an £8m loss in the first half of 2023, while Neptune Energy – whose portfolio was recently acquired by Eni – is expected to take a £53m tax hit due to the EPL.
Yvonne Telford, research director at Westwood Energy, told Energy Voice: “Oil and gas production in the UK is in decline, but the rate of that decline will be determined by the level of investment to maximise economic recovery from the basin.
“The impact of the EPL may deliver a short-term revenue win to the UK, but it has impacted investor sentiment and therefore in the longer term there is likely to be lower recovery, shorter field lives and therefore less revenues for tax payments.”
David Moseley, Welligence Energy Analytics vice-president of operations, added: “long-term, over the next 10-15 years for example, tax receipts could be less”.
Jeremy Hunt extended the life of the tax to 2029 in his recent March Budget, while Labour’s plans would see the tax rate be increased as well as the removal of investment allowances.
