British oil and gas drillers could face a new tax regime following the energy crisis, which pegs levies to fluctuations in global oil and gas prices.
The mechanism is intended to replace the notorious “windfall tax” and was outlined in a consultation on the North Sea published on Wednesday.
The consultation also seeks to unravel legislation introduced by the Labour government banning new oil and gas licences in the North Sea.
The windfall tax demands an additional 38 per cent levy on profits from oil and gas and was introduced when energy prices soared in the wake of Russia’s invasion of Ukraine in 2022.
It is seen as controversial in the sector, which argues its sudden introduction undermined investor confidence. Critics believe tying the rate to energy prices would create a more predictable tax regime.
The Department for Energy Security and Net Zero (DESNZ) said the new plans would deliver a “fair return for the nation during times of unusually high prices.”
It comes after the UK government conceded plans for the Rosebank and Jackdaw oil and gas fields off Shetland were green lit unlawfully, following a High Court verdict in January.
The Energy Secretary, Ed Miliband, said: “The North Sea will be at the heart of Britain’s energy future. For decades, its workers, businesses and communities have helped power our country and our world.
“Oil and gas production will continue to play an important role and, as the world embraces the drive to clean energy, the North Sea can power our plan for change and clean energy future in the decades ahead.”
Unions have put up fierce opposition to Labour’s plans to ban new licenses in the North Sea.
Unite general secretary Sharon Graham said: “Unite has been calling for the government to produce a concrete plan with real jobs for the transition of North Sea workers since it was elected. This consultation could be a step in the right direction, but it must be more than a talking shop.
“We urgently need investment in wind manufacturing and other green technologies to create the well paid, highly skilled jobs which are regularly promised but rarely delivered.
“Until that happens, we need to resist any calls that amount to offshoring our carbon responsibilities for the sake of virtue signalling. We must not let go of one rope before we have hold of another”