The UK’s oil and gas industry will pay £7.8 billion in taxes this year – a significant boost for the UK Treasury and roughly equal to 1% of the nation’s entire tax revenue Offshore Energies UK (OEUK) has told the government.

It has written to Kwasi Kwarteng, the energy secretary, setting out the sector’s latest responses to the cost-of-living crisis caused by the global surge in energy prices – and its concerns over the consequences of a windfall tax.

The £7.8bn tax payments for 2022-23, predicted by the Office for Budget Responsibility, are equivalent to about £279 per UK household.

They also represent a 20-fold increase on 2020-21. Back then, plummeting demand and prices saw most energy companies make multi-billion-pound losses, contributing to a UK tax take of just £400m from the UK offshore oil and gas sector.

The recent surge in global energy prices has reversed that trend. OEUK’s letter points out that the existing 40% tax rate imposed on the UK’s offshore oil and gas operators – the highest rate of any industry – means the Exchequer is already among the biggest beneficiaries.

The UK also benefits from the 195,000 jobs supported by the offshore energy industry and from having its own supplies of oil and gas – making it less vulnerable to global shortages.

It means the UK’s oil and gas operators are boosting both the nation’s energy security and its tax revenues. The OBR’s Economic and Fiscal Outlook from March 2022 also predicts that the Treasury will earn another £4.8 billion from the UK’s offshore oil and gas operators in 2023/24.

Commenting on the letter, Deirdre Michie, OEUK’s chief executive, said: 
“We are deeply concerned about the difficult circumstances facing UK consumers and our industry is committed to supporting the nation now and building a low-carbon future.

KeyFacts Energy Industry Directory: Offshore Energies UK

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