UK North Sea on the brink: why fiscal reform can't wait

The new government has pledged to change the UK's fiscal system for the fourth time in two years, with new energy profits levy (EPL) terms to be announced in the October budget. It plans to reduce capital allowances, but has not said by how much, and plans to replace the EPL after 2030, but has not said what with. The confirmed changes are an increase in the marginal tax rate to 78%, from 75%, from 30 October, the removal of the 29% EPL investment allowance (IA) and an extension of the EPL to 31 March 2030, from 2029. For companies trying to allocate capital to the sector, planning against this backdrop is almost impossible. We have modelled the likely outcome of operators planning for the worst, and from the perspective of energy security and oil and gas industry, it’s not pretty. This report includes an analysis of what a worse case scenario would look like for the UK upstream sector.