Cavendish research director James McCormack talked with Proactive about the UK North Sea oil and gas sector and the far-reaching consequences of the Energy Profits Levy (EPL).
McCormack detailed how the EPL, originally introduced in 2022 as a temporary 25% measure, has since evolved into a 38% tax lasting through 2030, creating significant investment uncertainty. He explained, “The tax rate in the UK has gone from 40% in 2021 to 78% in its current state,” highlighting the shift as a major deterrent for continued exploration and production.
The interview covers how this fiscal environment has accelerated production decline and increased the UK’s reliance on imports, leaving households and businesses exposed to international energy price volatility. Cavendish attributes declining output to reduced capital expenditure, citing record-low exploration in 2024 with just four wells drilled.
McCormack also discussed ongoing government consultations, including those on Scope 3 emissions, fiscal regimes, and licensing policies. He noted the environmental trade-offs of increased imports, which can be up to four times more emissions-intensive than domestic production.
He warned that further inaction or policy instability could see the North Sea become a “stranded opportunity,” with early field closures, rising decommissioning liabilities, and a significant risk of skilled workforce loss.
