UK Set to Extend Oil & Gas Windfall Tax This Week

The UK windfall tax on energy firm profits is expected to be extended by another year to 2029 this week during the annual budget speech later this week, Reuters reported Monday, citing unnamed industry sources who had been privately briefed on the matter.

The report comes shortly after crisis talks organized by oil and gas producers in the UK in late February, where they discussed the potential “hammer blow” impact on production, dividends and industry jobs.

On Wednesday, British Finance Minister Jeremy Hunt is expected to reveal the extension during his budget speech.

The windfall tax on energy companies was first introduced in May 2022. In the fourth-quarter of 2022, Hunt increased the windfall tax from 25% to 35%, which Reuters notes has culminated in a 75% overall tax burden on British North Sea oil and gas producers. The longevity of the windfall tax was also extended from 2025 to 2028 at that time, in addition to widening its net to include electricity generators at 45%.

The rate of the windfall tax is expected to remain the same when Hunt announces the anticipated extension this week, Reuters cited its sources as saying.

The crisis meeting in late February bemoaned a windfall tax that the industry fears will decimate investment in the country’s oil and gas producers. The talks were hosted by Offshore Energy UK (OEUK), with its head warning that there are no jobs and companies will not be able to attract investors as a result of the windfall tax policy.

“These proposals would deliver a hammer blow to the energy we need today and to the homegrown transition to cleaner energies,” OEUK head David Whitehouse said at the time, prompting a Labour government response to the effect that the windfall tax will only apply “while there are windfall profits being made”.