THE PRESS Association has reported a speech by Rachel Reeves at the Fabian Society Conference, saying that a Labour government would extend the windfall tax on UK North Sea operators from 75% to 78%, “closing the fossil fuel investment loophole, and taxing oil and gas giants at the same rate at which they’re taxed in Norway”.
Offshore Energies UK (OEUK), which represents the UK’s offshore industry, covering gas, oil and offshore wind, said the impact of such changes would be disastrous for the UK’s energy supplies and future energy security. It also warned that the comparison with Norway’s tax regime was inaccurate and misleading.
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This is because, although Norway imposes headline tax rates like those proposed by Reeves on profits from oil and gas, it also give its offshore industry investment allowances and other tax concessions far more generous than would be the case in the UK. It means Reeves’ proposals would actually see the UK industry facing significantly higher taxes than their Norwegian counterparts.
This would, in turn, make many UK projects economically unviable, and lead to a rapid decline in output. OEUK has estimated that if investment in new fields were to halt now then oil and gas production would decline 50% by 2030. There is no sign of any similarly steep decline in demand for oil and gas – so imports would surge, making the UK increasingly reliant on other countries for its energy.
Jenny Stanning, Offshore Energies UK’s external relations director, said: “We all know that the UK must transition to low carbon energies as fast as possible. Our industry has pledged to work with the UK’s governments to reach net zero by 2050. But, in the three decades till then we will need gas and oil.
“About 24 million homes (85% of the total) rely on gas boilers for heat and we get 42% of our electricity from gas. We also have 32 million vehicles running on petrol and diesel. Gas-fired power stations make 42% of our electricity too. So, our homes, businesses, schools, and cars all need gas and oil.
“The companies providing those fuels are the same companies that are investing in the transition. They are already building the offshore wind farms, the CO2 capture and storage systems and the hydrogen production facilities that will power our country in future. Labour has acknowledged that it can only deliver this in partnership with business and our members stand ready to work together to achieve this.
“We have an obligation to warn all policymakers that, if you undermine those companies now, and send the sector’s 200,000 skilled workers into other industries, you will damage both the nation’s current energy security and our hopes of a rapid transition to low-carbon energies.
“So, policymakers need to remember that words have consequences. Only this week we heard that the UK’s biggest North Sea operator is winding down UK investment. This damage must stop and that means we need to find a compromise – a pathway we can all agree on, and which is practical for the country. We will be actively seeking those discussions.”
OEUK has also been in contact with the Labour Party seeking clarification of its plans should it win power. The party issued a statement to OEUK as follows:
“The next Labour government will make the UK a clean energy superpower … As part of the plan, Labour will manage existing oil and gas wells sustainably over the coming decades, recognising the jobs and local economic value they bring. The transition to net zero is an opportunity for industry, and a process. We won’t turn off the taps, but part of our plan is to stop licenses for new oil and gas fields.”
