Oil giants such as BP and Shell who operate in the North Sea should be given huge tax breaks to help protect the UK against Donald Trump’s burgeoning trade war, Chancellor Rachel Reeves has been told.
Aberdeen & Grampian Chamber of Commerce is calling on the UK government to reduce the 78 per cent tax burden on North Sea oil and gas producers, which also includes the likes of billionaire Sir Jim Radcliffe’s Ineos Group.
The lobby group said the move would be a “key first step towards greater domestic energy security” amid US President Donald Trump announcing plans to impose import tariffs on Mexico, Canada and China.
Trump has also made similar threats of significant levies on trade with the European Union.
The chamber of commerce cited analysts’ expectations that oil prices could fall if the impact of a global trade war hit demand.
In place until 2023, the Energy Profits Levy (EPL) is a windfall tax imposed on energy production.
It places a 38 per cent additional tax rate on oil and gas production, in addition to corporation tax at 30 per cent and the 10 per cent supplementary charge.
The chamber has argued that the tax burden no longer needs to be as high as it is as “price conditions long having long returned to normal levels”.
The organisation added that “UK oil production is now at an all-time low”, and gas production is at near-record lows.
‘We cannot afford to repeat these mistakes’
Aberdeen & Grampian Chamber of Commerce chief executive Russell Borthwick said: “The UK’s response to a global energy crisis in 2022 ran contrary to all good sense.
“Instead of bolstering domestic supply, enabling production from the North Sea and attracting new investment into the North Sea we have become increasingly reliant upon imports.
“That approach spooked the energy sector and its supply chain and knocked confidence at precisely the moment we should be driving the transition to net zero.
“With the world on the brink of a trade war, we cannot afford to repeat these mistakes.
“The UK is already heavily reliant upon imported gas from Norway and LNG shipped from the USA to meet our demands.
“Any fluctuations in the price of oil and gas could be very damaging in a world where returns on production from the North Sea are already marginal.
“The smart response would be to remove the EPL sooner rather than later – protecting our domestic energy sector and ensuring we’re not putting the UK economy at a significant disadvantage in an increasingly uncertain global context.”
Shell rewards shareholders as BP cuts jobs
Last month, City AM reported how Shell paid out more than £18.7bn to shareholders in 2024 while cutting spending on renewable energy.
The FTSE 100 giant reported a dip in earnings from £23bn in 2023 to £19.1bn in 2024 amid weaker oil prices and lower demand for fossil fuels.
Despite the drop-off in earnings, Shell said it had hiked dividends by four per cent in the fourth quarter and announced a £2.8bn share buyback programme, which it expects to be completed by its first quarter results for 2025.
In the same month, BP announced plans to cut thousands of jobs across its global workforce as it looks to cut costs and turnaround its share price.
The FTSE 100 oil giant told staff its plans would impact around 4,700 roles, around five per cent of its global workforce of 90,000, 14,000 of which are based in the UK.
BP also said it would reduce contractor numbers by 3,000.