Britain brings in price floor to North Sea windfall tax

Britain said on Friday a windfall tax on oil and gas producers would run until 2028 but the 75 percent level would almost half if prices returned to normal levels for sometime, in a move the government hopes will boost energy security.

Britain introduced its energy profits levy in May last year, two months after the jump in energy prices which resulted from Russia’s invasion of Ukraine, but the industry has warned the high tax level could hurt output in the long term.

The government said on Friday the 75 percent tax level, one of the highest in the world, would reduce to 40 percent if prices consistently return to normal levels for a sustained period.

Without the changes, the government said the future of its supply of oil and gas from the North Sea would be at risk, making the country more reliant on imported energy.

“That’s why it’s so important that we secure investment in our own domestic supply, protecting the tens of thousands of British jobs that come with it,” Treasury minister Gareth Davies said in a statement.

The government set the price floor at $71.40 per barrel for oil and 0.54 pounds per therm for gas, saying the level had been chosen based on 20-year historical averages. The mechanism would be triggered if prices fell below this level for two consecutive quarters.

The government said independent forecasts by the Office for Budget Responsibility indicated the mechanism would not be triggered before the windfall tax’s planned end date in March 2028.