Labour’s attack on the oil and gas industry means no new wells have been drilled in the British North Sea this year, for the first time in more than half a century.
Activity in UK waters has dried up as energy firms reel from the windfall tax on profits and Ed Miliband’s ban on licences for exploratory drilling in new areas.
And analysis of Budget documents shows the so-called Energy Profits Levy is raising billions of pounds less than expected – leading to calls for it to be scrapped to save the industry from collapse.
The levy was forecast to bring £26billion of revenue into the Exchequer in the three years after its introduction in 2022.
But in fact, it raised just £9.7billion in that time.
And the Office for Budget Responsibility has cut its forecast for how much it will raise over the next three years, from £15.6billion to £5.7billion.
Drying up: Labour’s attack on the oil and gas industry means no new wells have been drilled in the British North Sea this year
For this year alone, the figure has been slashed from £6billion to just £2.4billion while next year’s projection is down from £5.5billion to £1.7billion. By 2029-30, just £1.1billion of revenues are pencilled in.
Industry lobby group Offshore Energies UK (OEUK) called for the windfall tax to be scrapped immediately to breathe life back into an industry where 1,000 jobs are being lost every month.
It pointed out that 2025 will be the first year since 1964 that a new well has not been drilled.
Speaking to the Daily Mail, OEUK chief executive David Whitehouse said: ‘The North Sea is seen as a very difficult place to invest. Compare that globally, where there’s actually a significant amount of investment in oil and gas activity.
‘And it stands in stark contrast to what is happening over in Norway where the Norwegians are taking a different tack, continuing to invest and drive value from the North Sea.
‘They’re seeing significantly more investment in the Norwegian continental shelf than we’re seeing in the North Sea. For the first time since the 1960s, we haven’t seen a single exploration well drilled in the UK part of the North Sea this year.’
The windfall tax was introduced by the last Conservative government in 2022 as prices soared in the wake of Russia’s invasion of Ukraine.
The 25pc levy was raised to 35 per cent in November 2022 and then to 38 per cent from November last year by Labour.
That took the headline tax rate on oil and gas profits to 78 per cent– among the highest in the world.
Labour also extended its duration to March 2030 despite warnings that it is hitting investment and jobs – particularly given that oil has fallen back towards $60 a barrel from around $120 when it was introduced.
Aberdeen and Grampian Chamber of Commerce chief executive Russell Borthwick said Labour is effectively planning to ‘tax the industry to death inside five years’. Whitehouse said the decision to keep the windfall tax was ‘hugely frustrating’ given the damage it is doing.
‘We’ve seen a 40 reduction in production volumes and we’ll see a further halving of oil and gas production due to that lack of investment between now and 2030,’ he said.
‘We’ve seen a 40 per cet reduction in production volumes and we’ll see a further halving of oil and gas production due to that lack of investment between now and 2030,’ he said.
Whitehouse argued that the levy is in fact costing the Treasury rather than raising extra revenues as firms abandon the North Sea.
He said scrapping the tax would ‘unlock’ investment and ‘support the jobs that we’re losing in the sector’.
‘Ultimately, we would pay more tax, not less,’ he added.
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