UK oil lobby presses Treasury on 78% North Sea tax as basin shrinks

UK oil lobby presses Treasury on 78% North Sea tax as basin shrinks Offshore Energies UK told MPs the basin could still raise billions, but a 78% marginal tax rate keeps deterring investment as output and prices fall. On Wednesday (2026-06-17), David Whitehouse, chief executive of Offshore Energies UK, told a parliamentary select committee that the North Sea could still unlock billions for the British economy and give the Chancellor the means to help households struggling with energy costs.⁴ His pitch runs straight into the tax code. Britain's effective rate on North Sea oil and gas profits stands at 78%, among the highest in the world and, on the Economist's reading, a deterrent to fresh investment in a basin that already carries high production costs.³ The rate is no accident. Britain never scrapped the extra levy it imposed on North Sea profits in 2022, the energy-crisis windfall charge that pushed the marginal rate to that punitive level.² What began as a temporary grab on crisis-era earnings has hardened into the basin's standing fiscal regime. The mechanism the industry points to is plain enough. At a marginal rate near 78%, the least profitable barrels stop paying for themselves, drilling is deferred or cancelled, and output falls faster than geology alone would dictate, dragging future receipts down with it.³ The political backdrop is managed decline, not revival. Labour's policy is a muddle, the Economist argued in May (2026-05-17), while critics' talk of a North Sea renaissance is fanciful.³ For more than half a century the oil and gas beneath the North Sea propped up British public finances; the take peaked at 3% of GDP in the mid-1980s, enough to help fund the tax cuts of the Thatcher years.³ That dividend is long spent. Prices are not strengthening the revenue case either. ICE Endex TTF front-month traded near €42 on Friday (2026-06-19), and UK NBP front-month sat around €50, down roughly 1.6% that day. ICE Brent crude front-month was near $80.64, up about half a percent. Those levels are a fraction of the crisis peaks the windfall levy was written to capture. The basin is not uniformly shrinking. On its side of the North Sea, Norway has approved development plans to reopen three southern gas fields, Albuskjell, Vest Ekofisk and Tommeliten Gamma, three decades after they were shut in, its energy ministry said on Tuesday (2026-05-19).¹ Operator ConocoPhillips told Montel that production should start in the fourth quarter of 2028 at 5.7m cubic metres a day, which it put at about 1.5% of average daily output, on total investment of around €1.8bn for an expected 90m to 120m barrels of oil equivalent, mostly gas and condensate.¹ Norway is committing new supply on its side of the line while the UK side struggles to attract capital under a far heavier fiscal load. The Treasury's room to manoeuvre is tight. Britain now pays nearly 5% to borrow for ten years, about half a percentage point more than at the height of the market panic under Liz Truss, which leaves little appetite to give up a revenue stream the levy still collects.² Whitehouse is asking MPs to weigh whether easing the levy would draw enough new investment to recoup the revenue surrendered.⁴ The Treasury has signalled no shift. Norway's restart in late 2028 will give one read on what a softer regime delivers on the same geology; until then the UK basin keeps pumping less, taxed at among the world's steepest rates.^1,3