Chancellor Rachel Reeves had planned to announce an end to the energy profits levy in the Spring Statement but delayed a decision because of the Middle East crisis.
At a meeting with industry leaders today Ms Reeves was told that action was needed quickly to avoid the loss of oil and gas investment and thousands of jobs.
BP, Adura, Offshore Energies UK and the Aberdeen and Grampian Chamber of Commerce were among those attending the meeting at 11 Downing Street.
It followed several weeks of in-depth discussions, which took place at the instigation of the Treasury.
A government source said: “The Chancellor was clear with industry that she wants the Energy Profits Levy to come to an end.
“She has made that promise and she stands by it. Indeed, it was a commitment she wanted to make this week.
“But the crisis in the Middle East has had real-time consequences on oil and gas prices and it is right that we respond to this.”
The meeting followed a previous commitment from operators to invest £50 billion between now and 2050 if the EPL – a tax on profits – was replaced with the government’s own proposed successor windfall tax, the Oil and Gas Price Mechanism (OGPM), which is due to be introduced in 2030, but sooner if price fall below a certain level.
Ms Reeves reaffirmed her commitment to backing Britain’s oil and gas industry, and recognised that domestic oil and gas will continue to have a role in the energy mix for decades to come.
She told the meeting that she had instructed the Financial Secretary and officials to work with the industry on two immediate priorities: providing long term financial certainty and working with the industry on the current period of uncertainty.
Russell Borthwick, chief executive, Aberdeen & Grampian Chamber of Commerce, said: “We welcome the Chancellor’s recognition that the EPL must come to an end now. Events in the Middle East strengthen, not weaken, the case for change.
“The offer on the table was billions of pounds worth of investment, which can be unlocked overnight if the right fiscal and regulatory conditions are in place.
“For the thousands of companies and tens of thousands of workers who depend on the UK oil and gas industry, that investment would support jobs, strengthen supply chains and reinforce the UK’s energy security at a time of growing global uncertainty.
“There has never been a more been a more important, more urgent moment to back the North Sea and invest in domestic production. It is now incumbent upon the Chancellor to create the fiscal and regulatory environment which would allow these companies to invest.
“The Energy Profits Levy has left the UK exporting jobs and importing oil and gas from volatile regions. Moving to the Oil and Gas Price Mechanism can change that trajectory, but it’s up to the UK Government to act now.”
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