Scottish North Sea revenues reach 25 year high

09/04/2024
Offshore drilling

THE latest analysis from finance experts, RIFT, has revealed that Scottish revenues from North Sea oil and gas surged to its highest levels in the last 25 years, with the Energy Profits Levy (EPL) driving this boost to the Scottish economy.

In the recent Spring Budget, Jeremy Hunt announced that the Energy Profits Levy would be extended until March 2029, a decision that many have claimed could cause the demise of North Sea oil and gas, as energy producers struggle to turn a profit. 

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Originally set at 25%, the Energy Profits Levy was increased to 35% in January of last year, having originally been implemented to tax the huge profits being made following the invasion of Ukraine. It will remain in place until March 2029 or until such time that oil and gas prices return to ‘normal’ levels for a sustained period of time. 

Energy providers whose operations are largely North Sea-based are warning of a decline in production in 2024 as they face huge profit losses, however, the analysis by RIFT shows that North Sea oil and gas had already been in decline prior to the implementation of the EPL. 

Prior to the pandemic (2018/19), Scottish geographical revenues generated via North Sea oil and gas totalled £1.36bn. While this was a far cry from the peak of £8.85bn seen in 2008/09, it had marked a fourth consecutive year of revenue growth.

However, like many areas of industry, North Sea oil and gas was hit hard by the pandemic, with Scottish revenues falling to £825m in 2019/20 and then again to just £752m in 2020/21. 

Following Putin’s invasion of Ukraine in February 2022, a spike in profits did cause Scottish North Sea oil and gas revenues to spike to £2.45bn in 2021/22 – a 225% annual increase – driven by North Sea corporation tax. However, it’s the Energy Profits Levy that has brought about the biggest economic boost to Scotland via North Sea oil, with Scottish specific revenues at a 25 year high. 

During the 2022/23 financial year, almost £9.4bn was generated in North Sea oil and gas for the Scottish economy, marking a 284% annual increase, with just over £4bn coming via the EPL. With the levy now set to remain until March 2029, North Sea oil and gas is set to become a cornerstone of the Scottish economy once again. 

Bradley Post, MD of RIFT, commented:

“Households across Scotland are unlikely to sympathise with the big energy providers and the woes of their dented profit margins, having previously watched them enjoy huge profits while the average person struggled with the cost of running their home. 

While North Sea oil and gas is far from the only pillar of the Scottish economy, it’s been a historically important one and so the sizable boost in revenues that has come from the Energy Profits Levy will be a very welcome one. 

While some may be calling the death of the industry as a result of the Energy Profits Levy, many more believe that the tax paid is far better off benefitting the Scottish economy than it is sitting in the back pockets of energy provider execs.” 

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