Harbour Energy, a prominent North Sea operator, has announced that over £2 billion of planned investment in the region has been put on hold due to the UK’s Energy Profits Levy (EPL) on oil and gas profits. Linda Cook, the company’s chief executive, warned that the current tax regime, which pushes the overall burden on producers to approximately 78%, is diverting crucial capital overseas and poses a threat of further job losses across the sector.
Speaking to Dow Jones, Ms Cook stated that the EPL is undermining domestic energy production and increasing the UK’s reliance on imports, particularly at a time of heightened geopolitical instability. Harbour Energy has already reduced its workforce by around 700 roles since the levy’s introduction, with further reductions possible if investment constraints persist. The company highlighted that the prevailing fiscal environment makes UK projects significantly less attractive compared to other international opportunities. This stance is underscored by Harbour Energy’s recent $3.2 billion acquisition of US-based LLOG Exploration, where tax rates are considerably lower, standing at approximately 23%.
The Energy Profits Levy was initially introduced in May 2022 by the government, following a sharp surge in energy prices largely triggered by Russia’s invasion of Ukraine. Initially set at an additional 25% on qualifying profits, it brought the total tax rate on North Sea oil and gas operations to 65% (comprising a 30% Ring Fence Corporation Tax, a 10% Supplementary Charge, and the 25% EPL). This rate was subsequently increased to 35% from January 2023, raising the combined tax burden to 75%. As of November 2024, the EPL was further increased to 38%, resulting in a headline tax rate of 78% on North Sea oil and gas profits.
In response to the industry’s concerns, Aberdeen energy veteran Sir Ian Wood has urged Chancellor Rachel Reeves to expedite the repeal of the “unfair and punitive” levy.
Sir Ian indicated that the Chancellor has signalled to industry leaders that the EPL could be replaced with a new fiscal regime. He told the Press & Journal:
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“The Chancellor’s willingness to end the unfair and punitive Energy Profits Levy is welcome. It has and remains a position of common sense to support oil and gas to protect jobs, reduce our reliance on carbon heavy imports and generate greater domestic economic and energy security until such time renewables are available commercially and at scale.”
Sir Ian called on the government to swiftly introduce its proposed Oil and Gas Price Mechanism, stressing that a stable, long-term policy framework is essential to attract the necessary billions in investment to sustain the North Sea basin and its workforce.
Ms Cook echoed this sentiment, arguing that ending the levy would enable the UK to better utilise its own natural resources, thereby safeguarding jobs and investment across the entire energy supply chain. The calls from industry figures underscore the critical need for policy stability to foster investment and ensure the UK’s long-term energy security.
