The Treasury faces a £13 billion hit from Labour’s ‘green’ North Sea shutdown, BP’s former finance chief has warned. The Telegraph has the story.
Brian Gilvary, who sat on the board of BP from 2012 to 2020, said punishing tax rates and a ban on new drilling had prompted many oil and gas operators to halt activity in British waters sooner than expected.
As a result, companies are ripping pipes and platforms out of the sea far earlier than planned. The vast costs of such decommissioning can be claimed back against the tax paid on previous years’ profits, meaning a huge rebate bill for the Treasury.
The latest estimates suggest the rebates, plus foregone tax from North Sea operations, could cost the Treasury around £13 billion between now and 2035.
Writing in the Telegraph, Gilvary, who is now Chairman of Sir Jim Ratcliffe’s Ineos Energy, said: “Forcing fields to close prematurely does not simply switch off future tax receipts; it also brings forward the point at which those decommissioning tax reliefs crystallise, increasing the near-term pressure on the public finances.”
Gilvary said the decline of the UK oil and gas industry under Labour was “eroding long-term national wealth” and damaging “the fiscal capacity to fund public services”.
The warning comes a week after BP announced plans to exit the North Sea by selling its operations there. Meg O’Neill, the company’s Chief Executive, has since said the region “doesn’t compete for capital”.
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Oil and gas companies face a 78% levy on their UK profits after Labour increased a windfall tax on the industry when it came to power. The Government has also extended the levy by two years, from 2028 to 2030.
Gilvary said BP’s decision to exit the North Sea was “a tangible warning sign” about the cost of these policies.
He said: “When major operators retreat, the consequences ripple far beyond corporate balance sheets.
“Investment falls, supply chains weaken and highly skilled jobs, many clustered in Scotland and the North East, begin to disappear. Tax revenues decline, and with them the fiscal capacity to fund public services and the energy transition itself.”
Annual decommissioning costs have already risen from £2 billion in 2024, the year of Labour’s election, to £3 billionn every year from now to at least 2030, according to data from industry regulator the North Sea Transition Authority (NSTA).
The NSTA predicts at least £28 billion will be spent on shutting down the North Sea from now to 2035. This implies a total cost to the Treasury of around £13 billion over that period.
