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UK’s Oil and Gas Windfall Tax to Stay Until 2030, Sparking Industry Fury
Britain’s controversial Energy Profits Levy will remain in place until March 2030, dealing a devastating blow to North Sea producers who warned the decision could cost thousands of jobs and cripple investment across the sector.
The UK government has rejected calls to scrap the windfall tax early, instead announcing a new Oil and Gas Price Mechanism that won’t take effect until the end of the decade. Industry leaders are calling it a missed opportunity that will accelerate the decline of domestic energy production.
What the Government Decided
Chancellor Rachel Reeves confirmed in this week’s budget that the Energy Profits Levy—currently set at 38%—will continue taxing North Sea operators until at least 2030. The headline tax rate for the oil and gas sector now sits at 78%, making Britain one of the least attractive places for energy investment globally.
The replacement Oil and Gas Price Mechanism will adopt a revenue-based model, applying a 35% tax only when oil exceeds $90 per barrel or gas tops 90 pence per therm. The OGPM could arrive earlier if both commodities fall below these price floors, but that scenario appears unlikely.
Why Industry Leaders Are Alarmed
Trade body Offshore Energies UK condemned the decision as a “bitter blow” to workers and communities dependent on North Sea operations. The group warned that delaying reform until 2030 will accelerate production decline, with output forecast to fall 40% by the end of the decade unless action is taken.
This represents a significant departure from industry proposals. Producers argued that reforming the EPL in 2026 instead of 2030 could actually increase tax receipts by £15.7 billion to £48.6 billion over ten years, while simultaneously unlocking billions in new investment.
Major operators including Serica Energy have indicated they will reassess UK activities, with many already opting to sell assets, merge operations, or scale back North Sea operations due to the punitive tax environment.
The Real Cost
Employment prospects have darkened considerably. Offshore Energies UK estimates that as many as 40,000 jobs across the oil and gas industry and its supply chain are at risk over the next four years, with forecasts suggesting the loss of 1,000 jobs per month if current policy persists.
The government’s decision prioritizes immediate revenue generation to shore up public finances amid higher borrowing costs and welfare spending pressures. However, critics argue this short-term thinking will ultimately shrink the tax base as domestic production collapses and Britain becomes increasingly reliant on imported energy.
What Comes Next
Industry advocates have vowed to continue pressing the government for earlier reform. With no exploration wells drilled in 2025 and production already down 40% over the past five years, the clock is ticking on whether policymakers will reconsider before 2030 arrives.
The outcome will determine whether Britain maintains a viable domestic energy sector or accelerates its transition to dependence on foreign suppliers during a critical period of energy transition.
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