Cavendish on UK energy crisis & levy fallout

Cavendish research director James McCormack talked with Proactive about the evolving landscape of North Sea oil and gas production, focusing on the policy shifts that have reshaped the UK's energy market. He outlined the implications of the Energy Profits Levy (EPL), first introduced in May 2022, and its subsequent revisions that have taken the tax rate to 78%.

McCormack noted that the investment incentives originally embedded in the EPL have been removed, and its temporary timeline has now been extended to 2030, significantly impacting investment confidence. He said: “The tax rate in the UK has gone from 40% in 2021 to 78% in its current state,” highlighting the pressure on producers, especially when oil prices are low but EPL still applies due to gas price thresholds.

He also discussed the UK’s increasing reliance on imports due to falling domestic production, with forecasts showing gas output could halve again by 2035. This dependence has financial and environmental consequences, as imported gas can be up to four times more carbon-intensive.

McCormack emphasised the limited UK gas storage capacity compared to other European nations, warning that energy security risks like blackouts could become more frequent without change.

For the full interview that discusses what's at stake for investment in the North Sea, follow this link.

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