Insight
UK's new fiscal mechanism: can it be fair AND simple?
*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
Report summary
The UK government is currently reviewing responses to its consultation document on a new fiscal mechanism to replace the energy profits levy (EPL). The new terms are expected to be announced in the October budget, but the mechanism will only be activated after the EPL sunset (31 March 2030). Two of its principal objectives are: • to generate a fair share/return for the government from production of the nation’s resources when prices are “unusually high” • to be simple to administer, utilising existing systems as much as possible There are several trade-offs between being fair – to both the nation and investors – and minimising the additional administrative burden. This insight analyses the key issues in designing such a windfall mechanism and through the lens of fairness and simplicity.
Table of contents
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Executive summary
- 1. Frequency of calculations
- 2. Establishing price thresholds
- 3. UK North Sea costs and competitiveness
- 4. Revenue-based mechanism (RBM) or profits-based mechanism (PBM)?
- 5. Tax rate
- Appendix
Tables and charts
This report includes the following images and tables:
- RBM vs. PBM sample calculation
- Annual Brent & NBP price range (2015-2024)
- Brent rolling average vs. EPL price floor & NBP price versus EPL price floor
- Distribution of daily prices over different look-back periods: Brent
- Distribution of daily prices over different look-back periods: NBP
- Price thresholds based on different look-back periods and percentiles
- Brent price thresholds converted into GB£
- Top countries by total remaining offshore resources and by remaining commercial offshore resources
- Remaining unit technical costs (UTC) of onstream fields & the minimum, maximum and average for each country
- Global offshore pre-FID discoveries: resource size vs. pre-tax breakeven price
- UK pre-FID cohort: pre- vs. post-tax breakevens & global peer group pre-FID projects: pre- vs. post-tax breakevens
- Gov't. share of UK pre-FID field under peer group fiscal terms & peer group minimum, maximum, and average gov't shares (%)
- 3 more item(s)...
What's included
This report contains:
