Trump slams UK 'mistake' on North Sea oil, gas taxes

Donald Trump has criticized the UK government for its heavy taxation on North Sea oil and gas producers, calling the policies a "very big mistake" as companies have started withdrawing their investments.

In a post on his social media platform Truth Social on Jan. 3, the US president-elect called on the UK to "open up the North Sea" and "get rid of the windmills," in response to a report that the US company APA Corp. plans to exit the UK sector by December 2029 due to the "onerous" windfall tax.

APA Corp., formerly called Apache, is among several upstream producers to reduce their North Sea investment, following similar actions by Harbour Energy and a potential withdrawal by Japan Petroleum Exploration amid an industrywide outcry over punitive tax rates on UK operations.

Prime Minister Keir Starmer's climate-conscious Labour Party made a key election pledge to raise the Energy Profits Levy, a windfall tax on oil and gas companies, and on Nov. 1 implemented a 3% increase, raising the headline tax rate to 78%.

The new measures also extended the expiry date for the EPL from March 2028 to March 2029, prolonging a tax initially introduced as a temporary measure in 2022, following the Russia-Ukraine war that propelled energy companies' profits to record highs.

As prices have normalized, producers have criticized the higher tax burden for diminishing the appeal of operating in the mature North Sea basin, where output has already started declining.

According to S&P Global Commodity Insights analysts, UK crude output dropped 10% year on year from January to September 2024, due to the closure of oilfields and shrinking crude reserves. The commissioning of Equinor's Rosebank and Shell's Penguins projects is expected to slow the rate of decline, but it will not be sufficient to prevent an absolute decrease in production.

Licensing suspension

A manifesto pledge by the UK Labour Party to halt the issuance of new oil and gas exploration licenses has intensified industry fears of an accelerated downturn, in stark contrast to the US, where Trump has encouraged producers to "drill, baby, drill."

Despite growing criticism from industry heavyweights for crimping the UK's energy sector, the government has thus far maintained its stance on tougher policies.

Speaking at the 29th UN Climate Change Conference in Baku a week after the US election, Starmer avoided direct reference to Trump but highlighted "two paths ahead" for policymakers, condemning "inaction and delay" on climate targets and doubling down on his commitment to end North Sea licensing.

The government plans to conclude a consultation on suspending oil and gas licensing by spring 2025.