North Sea operators push for early tax reform

By the Editorial Team · Wednesday, September 16, 2026

Offshore Energies UK has urged the UK government to fast-track the Oil and Gas Revenue Levy to increase tax revenue by up to £15 billion over the next decade and stimulate investment in North Sea production. Accelerating this fiscal reform could unlock 111 new projects, nearly double oil and gas output by 2035, and reduce the UK’s dependence on volatile LNG imports.

The United Kingdom could generate up to £15 billion more in tax revenue from oil and gas production over the next decade if the government accelerates the introduction of its new fiscal framework for the sector, an industry group has reported. Offshore Energies UK (OEUK), representing North Sea operators, urged Prime Minister Andy Burnham’s administration to implement the Oil and Gas Revenue Levy (OGRL) by next year, rather than the scheduled date of March 2030.

According to OEUK’s annual economic report, advancing the reform would increase tax receipts by an estimated £2.4 billion in industry-specific taxes and an additional £12.6 billion from payroll taxes through 2035. The group argued that updating the fiscal regime sooner would stimulate investment and production in the North Sea, helping safeguard jobs in the sector.

This recommendation comes amid concerns over the UK government’s fiscal trajectory. Chancellor of the Exchequer John Healey faces pressure to manage rising borrowing costs and inflationary risks heightened by geopolitical tensions related to the Iran conflict. The possibility of enhancing revenue from oil and gas work stems from the current uncertainty over new spending plans ahead of Healey’s debut budget at the end of October.

The existing windfall tax, known as the Energy Profits Levy (EPL), was introduced in 2022 by the previous Conservative government to capture excess profits following a surge in energy prices triggered by Russia’s invasion of Ukraine. The EPL has since been extended and increased by both Conservative and Labour administrations. However, the industry has criticized the levy alongside Labour’s ban on new exploration drilling as factors contributing to a decline in investment, prompting some companies to reduce their North Sea operations, sell assets, or pursue mergers. British Petroleum (BP), the last global oil major with a standalone North Sea business, recently announced plans to exit the region.

OEUK called for a “competitive, progressive and stable” fiscal regime to attract sustained investment, warning that delays in implementing the OGRL would diminish the reform’s potential effects. The group emphasized that speeding up fiscal changes and adopting a “pragmatic approach to licensing” focused on maximizing domestic production could unlock 111 additional projects and draw £50 billion in private investment. Such developments could nearly double UK oil and gas output over the next 25 years.

If reinforced by government policy, these projects could start delivering new oil and gas volumes within months, the group said. Production could reach as much as 288 billion cubic meters of gas from 2025 to 2035, representing a 64% increase above current projections. This would enable the UK to supply roughly half its domestic gas demand, significantly reducing reliance on liquefied natural gas (LNG) imports, which have faced volatility amid ongoing global geopolitical uncertainties.

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