Gas firms call for energy profits levy overhaul

The current levy is a temporary windfall tax on what were seen as excessive energy profits

The company running Teesside's natural gas terminal has claimed that unless the government rethinks a levy on oil and gas profits, thousands of jobs and billions of pounds of investment in the UK will be lost.

Energy firm Kellas Midstream said the energy profits levy introduced in 2022 is contributing to the regular loss of jobs in the industry and needs to be overhauled in the Budget on 26 November.

It has come together with trade body Offshore Energies UK to propose a revamped tax which would only apply to profits above a certain agreed level.

The government said it was continuing to explore what will happen once the current levy ends in 2030.

The levy, introduced by the then Conservative Chancellor Rishi Sunak, was designed as a temporary windfall tax on what were seen as excessive profits within the industry.

It was initially set at 25% and then raised to 38% in November 2024 which, when combined with pre-existing taxes, effectively means some oil and gas producers face a 78% charge on their profits, with allowances made for investments.

It will be reviewed by March 2030 when it is due to lapse but, in an open letter to the Chancellor Rachel Reeves, Offshore Energies UK has suggested the sector could shed 1,000 jobs a month if the levy remains in place in its current form.

The trade body and Kellas Midstream said their new proposed levy would deliver a £137bn boost to the UK economy and safeguard 160,000 jobs.

They also said the changes would generate more investment in the industry and potentially add 23,000 new posts.

Offshore Energies UK argued the boost to the economy in the long term would outweigh the short-term loss of tax income to the government.

'Pay fair share'

Kellas Midstream said its Middlesbrough terminal brings ashore 25% of the UK's natural gas supply and the industry supports 4,500 jobs in Teesside.

It also said it was prepared to invest in a blue hydrogen plant in the region.

The firm's head Nathan Morgan said the gas industry was a "key part" of energy transition.

"North Sea gas is powering industry, heating homes and underpinning the scale-up of renewables by keeping the lights on when the wind isn't blowing and the sun isn't shining," he said.

A government spokesperson said: "We are taking a responsible approach that recognises the long-term role of the sector while exploring what follows the end of the Energy Profits Levy, so firms continue to invest and pay their fair share of tax."

The proposals from the two organisations have been submitted to the chancellor.