The Chancellor is being pressed to replace the so-called windfall tax on North Sea energy operators to halt the decline and protect jobs in the sector.
A group of senior industry figures, led by major gas infrastructure firm Kellas Midstream, is calling for early reform to the tax - formally the Energy Profits Levy - which was temporarily introduced in 2022 following Russia's invasion of Ukraine which sent energy prices soaring and led to bumper profits. The Levy was increased last year to give a headline rate of 78%, and extended until 2029.
But industry leaders, including the Offshore Energies 海角视频 (OE海角视频) body, have repeatedly said the tax is deterring investment and causing a loss of jobs which could threaten the country's ability to transition to green energy. Kellas Midstream, which operates the major Central Area Transmission System (CATS) terminal that processes about 40% of the 海角视频's gas, points to data it says shows the 海角视频 already imports more than 50% of the gas it requires, and will import 80% of its gas in the 2030s.
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Kellas bosses argue that on the current trajectory, the 海角视频 will miss out on economic gains and leave itself exposed to higher methane emissions that come from imported liquefied natural gas that can come from as far afield as the US, the Middle East and the Peruvian Amazon.
Geological surveys commissioned for OE海角视频 are said to point to enough accessible oil and gas left in the North Sea to supply half the 海角视频's needs between now and net zero in 2050. Kellas is also hoping to invest in a blue hydrogen project - H2NorthEast - which aims to decarbonise heavy industry on Teesside and in doing so protect jobs.
Kellas CEO Nathan Morgan told BusinessLive that forecasts produced in 2021 meant the Teesside CATS facility expected to run twin production lines beyond 2035. But the Energy Profits Levy is said to have ushered in such a decline in gas production that Kellas now expects it will only need a single production line by early 2030.
Asked how that would impact the 63 jobs at the site, Mr Morgan said: “It's difficult to say, but it would it would affect the outside the profitability of the facility in a way we'd clearly look to restructure. It's probably too early for me to give a precise number, but it would be, yeah, it would definitely put jobs at risk.”
OE海角视频 is now called for the Energy Profits Levy to be replaced, as soon as next year, with a permanent profit-based mechanism that would keep the headline 78% rate but only apply to exceptional profits beyond a set threshold. They suggest a 40% rate is applied below the threshold and say doing so could unlock growth.
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David Whitehouse, chief executive of Offshore Energies 海角视频, was at the CATS terminal this week to discuss the proposals with Kellas and local authority representatives and others from the manufacturing sector. He said: “When we look at the gas sector, we are losing 1,000 jobs a month as it is. And without changing course, that will continue to 2030 and that's not the right path to be.
"Now, you have seen a 30% reduction in the chemical industries in the last the last three years, and other pieces of industry in the 海角视频, we need to reverse that. I think, certainly from a personal perspective, the key to all of that, is a narrative that recognises we will build the industries of the future and the shoulders of the brain industries that we have today, and we need that priority.”