9th March 2023
Today we are posting.
ACREEF North Sea Study Occasional Paper No. 148 “Economic Impact of the Energy Profits Levy on UKCS Investment Projects”
Professor Alexander G. Kemp and Arturo Regalado
May 2022 UK Gov introduced an Energy Profits Levy (EPL) to tax profits of Oil and Gas companies operating on the UKCS.
UK Gov announced changes to the EPL November 2022 increasing the rate from 25% to 35% from January 2023 extending the duration to March 2028.
The Objectives for the Energy Profits Levy is to increase reinvestment of profits via the investment allowances, and to tax windfall profits brought about by high energy prices.
The Oil price collapse following the Covid-19 Pandemic created a difficult operational environment for Oil and Gas Investors. Low profits and or losses, restricted access to finance and led to capital rationing.
Going forward, we know that the effects of the updated UKCS Energy Profits Levy are complex. However, there is some degree of certainty that the EPL will reduce cash flows and introduce constraints on the ability of investors to schedule their expenditures and production.
ABIS Energy see two underlying problems with the EPL and Govt actions on UKCS Oil and Gas.
- The majors have mostly moved away so, for them the UKCS is peripheral.
- That being so, the current Operators in UKCS are short-term and don’t have deep pockets.
They may just walk away.