London associate Christy Wilson spoke to Rigzone about the recent government announcement concerning the UK Energy Price Levy and its impact on UK oil and gas producers. The levy, which currently puts a marginal tax rate of 75 percent on North Sea oil and gas production, will remain in place for the next five years while oil and gas prices "remain higher than historic norms." This rate is expected to drop back down to 40 percent if and when prices return "to, or below, $71.40 per barrel for oil and GBP 0.54 per therm for gas, for two consecutive quarters," as stated by Rigzone.
"Arguably, if companies are no longer gaining windfall profits then it seems logical to remove the levy," Christy told Rigzone. "Importantly, the government does still intend to keep the levy in place but would only remove the levy if there was a sustained decrease in oil and gas prices."
Christy noted that the Office for Budget Responsibility does not expect the consistent price decrease to be triggered before 2028. "Therefore, at the moment, it is reasonable to conclude that the levy will go unchanged," she added.
"Moody's Sees Little Relief for UK Oil and Gas Producers" Rigzone, June 13, 2023.