ROAD TO WECA 2024

Autumn Budget 2024: Shaping the Future of UK Oil and Gas

 

Written by Charlie Abrines, Project Director, World Energy Capital Assembly, The Energy Council 

Published 22 October 2024

Business Model

OCTOBER 2024 – In just eight days, Rachel Reeves will deliver the first Labour budget in 14 years, a budget that promises to be ‘painful’ as Labour tackles the £22bn public finance deficit. With Britain’s ambition to become a clean energy superpower, we can expect a significant shift away from traditional energy sources, including oil and gas, towards greener alternatives. The decisions made in this budget will have lasting consequences for UK North Sea operators and investors.

A recent report by Stifel highlights a crucial paradox: while increasing the windfall tax and removing investment allowances might raise short-term tax revenues, it would stifle investment, leading to a drop in production, fewer jobs, and greater reliance on imported energy—ultimately increasing emissions. Raising the Energy Profits Levy (EPL) to 78%, as speculated, may boost tax receipts from 2024 to 2029, but with investment dwindling, production could begin to collapse by 2030, resulting in sharply lower taxable profits in the long run.

Comparisons between the UK and Norway’s tax models are misleading. While both countries might have similar EPL rates, Norway’s tax system incentivises investment. By contrast, the UK's current regime actively discourages it, harming not just oil and gas but renewable energy projects as well. Jersey Oil & Gas’s recent decision to hold off on UK North Sea developments pending the budget highlights growing investor caution.

The real-world effects of these fiscal changes will ripple across the entire industry, affecting not just investment decisions but also the livelihoods of the 200,000 people employed in the UK oil and gas sector. While the transition to green energy is essential, the highly skilled oil and gas workforce must play a key role in this shift. Offshore Energies UK suggests that 90% of this workforce could transition into renewables, but there aren’t enough opportunities to absorb them. Meanwhile, other jurisdictions are continuing to operate, risking a brain drain of technical knowledge away from the UK.

For 15 years, the World Energy Capital Assembly (WECA) has been the premier meeting place for energy executives, financiers, and investors. In light of the seismic changes the upcoming budget could bring, WECA24 will be the pivotal event where industry leaders come together to analyse, adapt, and seize the opportunities emerging from this fiscal overhaul. If you want to understand how these changes will shape the future of UK energy—and your place within it—WECA24 is where you need to be.

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