Tax on oil and gas firms may not be big enough

The more investment a firm makes into the UK, the less tax it will pay, as we want to support the economy, jobs, and energy security, a Treasury spokeswoman said.

The rate for the EPL was originally set at 25%. In the Autumn Statement last month, Chancellor Jeremy Hunt announced that it would increase to 35% from January 2023 and stay in place until March 2028. It was scheduled to finish at the end of 2025.

Oil and gas firms in the North Sea are taxed differently than other firms. Taxes on their profits are higher - they pay 30% corporation tax on their profits and a supplementary 10% tax on top of that. Other firms currently pay 19% of corporation tax.

Neivan Boroujerdi from energy consultancy Wood Mackenzie said that while TotalEnergies is the second biggest producer in the North Sea, it is not likely to be one of the biggest investors over the next few years.

It's partly the reason why it is so adversely affected by the levy windfall tax in the first place, because they can't use their investment allowances to offset their levy payments, according to Boroujerdi.

By 2030, the industry plans to invest 200 billion dollars in the broader energy sector, according to Deirdre Michie, chief executive of OEUK. This would help ensure that the UK can meet its net-zero and climate goals and boost its energy security while we make that low-carbon transition.