It argued that the levy is already having a severe impact on the sector by blocking new field development and stalling existing projects. With 282 fields operating, the EPL is creating a ‘no new investment’ scenario, threatening domestic energy supply and long-term growth.

OEUK also said that around 1,000 jobs a month are being lost, and nine out of 10 supply chain companies are looking overseas due to lack of work in the UK.  

Major players are closing or scaling back production, with knock-on impacts on infrastructure hubs damaging other operators and the wider system, it also stated late last month.  

The remarks were made in launching OEUK’s new report, Impact of UKCS fiscal policy on UK economic growth. The study contends that without reform of the current fiscal regime, oil and gas production will fall from 2025 levels by approximately 40% within the next five years. The analysis is based on fiscal and econometric modelling of the UKCS conducted by OEUK, based on industry data. It also reflects wider analysis of UKCS potential undertaken by the energy analytics firm Westwood Global Energy Group.

The report adds that keeping the levy until 2030 may boost short-term tax revenue by £6bn, but will accelerate the North Sea’s decline with wider economic damage.

The trade body also cited new figures from the Office for Budget Responsibility (OBR), which has revised down its forecast profits for the EPL. It now expects the levy to raise just £21.1bn between 2023 and 2028, compared to an earlier estimate of £65.7bn.

According to OEUK, a range of credible sources estimate the UK will use around 10–15bn barrels of oil and gas between now and 2050 in the event net zero targets are met. Independent geological data shows the North Sea basin could produce at least 7bn barrels of oil. However, it contends, poor returns and an unfavourable policy environment mean only 4bn barrels are currently forecast for production. The rest of UK demand will be met by imports.

The trade body’s alternative proposal would change the EPL into a permanent profit-based windfall tax activated only when both oil and gas prices exceed a set threshold. The headline tax rate would drop from 78% to 40%, but the new mechanism would still ensure additional tax revenue is generated when commodity prices are high. OEUK said this would work better for companies by offering greater predictability, a fairer investment environment and stronger incentives to reinvest in UK projects.

According to Wood Mackenzie, the UK could possibly reveal a replacement for the EPL in its November budget. Two approaches are under consideration: revenue-based versus profits-based mechanisms.  

Research by the market analyst finds that although the Brent oil price has been below the government’s own threshold for EPL application, it still applies to profits because the gas price is lower.  

Only 18% of discovered resources remain, while unit technical costs reach $35/b – nearly double the cost of comparable countries, according to Wood Mackenzie. UK projects under development are also smaller, on average a third the size of global peers at 27mn boe. Pre-tax breakeven prices average $44/b compared to $31/b globally.

Graham Hellas, Senior Vice President of Fiscal Research at Wood Mackenzie, said: ‘The UK’s cost disadvantage stems from operating in an ultra-mature, heavily exploited basin with 90% of remaining resources already onstream or under development. A competitive fiscal regime becomes crucial to offset these inherent challenges and attract continued investment. And for many operators, 2030 will be too late to restore UK competitiveness.’

At Offshore Europe, OEUK also launched its 2025 economic report, which reviews developments across the trade association’s remit of oil and gas, offshore wind, hydrogen and carbon capture and storage (CCS). In particular, it points out that the UK’s CCS sector is poised for rapid growth, with Track 1 clusters reaching financial investment decision (FID). By 2030, HyNet and the East Coast Cluster are set to remove 8.5mn t/y of CO₂, the equivalent of taking 4.5 million cars off the road. Track 2 clusters, Acorn in north-east Scotland and Viking in Humberside, received development funding in the UK government’s Spending Review and are expected to reach FID by the end of this Parliament.

At the event, OEUK CEO David Whitehouse said: ‘The decisions taken by the UK government in the coming weeks, on oil and gas licences, reform to the Energy Profits Levy, the build out of renewable energy on the path to clean power, our relationship with European partners, will all shape the future of our North Sea.’

‘Here in the UK, we stand at a crossroads. A tale of two futures. One path leads to homegrown innovation, opportunity, prosperity across the country. The other leads to fewer opportunities, greater uncertainty, a poorer country. We must choose to back homegrown energy in all its forms. Back our industries. The sector is critical – the path to energy security, economic value, highly skilled jobs, tackling emissions. Reindustrialisation not deindustrialisation. In a volatile world, energy security is national security. We cannot afford to get this wrong. While we use oil and gas we should prioritise our own, all while we build out world class renewable energy.’

Conservative leader Kemi Badenoch also spoke to delegates in favour of expanding oil and gas production. Under her leadership, the Conservative Party has reversed its former position in favour of net zero.

Last week, industry regulator the North Sea Transition Authority (NSTA) reported that the UK’s offshore oil and gas industry’s production emissions were reduced by 7% in 2024, a fifth consecutive year of reductions. This contributed to a 34% drop since 2018, according to its latest emissions monitoring report. Flaring activity, which is the second largest source of production emissions, dropped 4.8% in 2024 to the lowest level on record, and was 51% lower than in 2018.

Its OGA Plan, launched in 2024, sets out requirements for operators across four areas, including electrification and low-carbon power. NSTA says that these can make the biggest impact on production emissions, as power generation accounts for 80% of the current total.

The NSTA report’s authors went on to say that the reductions mean that the target of halving emissions by 2030, agreed by industry and government in the North Sea Transition Deal, is now well within reach.  

On the other hand, the report concludes that industry will not meet the 2040 target of lowering emissions by 90% or achieve net zero by 2050 without serious investment in large-scale active emissions abatement projects. It says that North Sea oil and gas operators must take bold and rapid action on emissions to hit key net zero targets and justify domestic production over the coming decades.