Texas-based oil company Apache Corporation has announced its plans to cease all operations in the North Sea by the end of 2029, citing the UK’s windfall tax as the primary reason for its departure. The company, which has been operating the Forties field near Fraserburgh since 2003, claims that the recent increase and extension of the Energy Profits Levy (EPL) have made its UK operations financially unsustainable.
Apache’s decision comes in the wake of the latest UK Budget, which confirmed an increase in the windfall tax on oil and gas profits from 35% to 38%, resulting in a total tax rate of 78% for energy firms. The tax has also been extended until 2030, a year longer than previously planned.
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John Christmann, chief executive of Apache parent firm APA, said UK regulators issued new rules that will require “substantial new emissions control investments” on facilities that operate in the North Sea beyond 2029.
He said: “After six months of evaluation, we have concluded that the investment required to comply with these regulations… coupled with the onerous financial impact of the Energy Profits Levy makes production of hydrocarbons beyond the year 2029 uneconomic.”
The company had already suspended all drilling activities in the North Sea last year, citing the “increasingly burdensome tax and regulatory regime” in the UK. This latest announcement marks a complete withdrawal from the region, where Apache’s operations accounted for 14.4% of its global production as of the end of 2022.
Russell Borthwick, chief executive at Aberdeen and Grampian Chamber of Commerce, urged the UK Government to take urgent action.
He said: “We have have been warning for almost two years now that the windfall tax would drive capital, investment and jobs away from the North Sea.
The UK Government must now work with industry swiftly to devise a new progressive tax regime for the North Sea, where the tax rate increases as oil and gas prices rise and decreases when prices fall.”
A Government spokesperson said: “We are committed to making the UK a clean energy superpower, with both public and private investment required to support the transition, enhance energy security, and provide sustainable jobs of the future.
“To that end we secured £24bn for green industries at the International Investment Summit and have made changes to the Energy Profits Levy that recognise the oil and gas sector’s role in the UK’s energy mix while asking it to contribute more to the transition – helping to fund GB Energy based in Aberdeen.”
As the debate over the balance between energy security, environmental concerns, and fiscal policy continues, Apache’s departure serves as a stark reminder of the challenges facing the North Sea oil and gas industry in an evolving regulatory landscape.
