Oil giants operating in the North Sea, including BP and Shell, are being urged to receive substantial tax cuts to shield the UK from the growing threat of a global trade war, according to Chancellor Rachel Reeves.
The Aberdeen & Grampian Chamber of Commerce is calling for a reduction in the 78% tax burden placed on North Sea oil and gas producers, which includes billionaire Sir Jim Ratcliffe’s Ineos Group. The business lobby believes this move is crucial for enhancing the UK’s domestic energy security amid US President Donald Trump’s plans to impose import tariffs on Mexico, Canada, and China.
Trump has also hinted at possible tariffs on trade with the European Union. The chamber warned that oil prices could drop as a result of a global trade war affecting demand.
The Energy Profits Levy (EPL), in effect until 2023, imposes a 38% additional tax on oil and gas production, on top of the 30% corporation tax and a 10% supplementary charge.
The chamber argues that with oil prices returning to normal levels, the current tax burden is unnecessary. It also pointed out that UK oil production is at a record low, and gas production is close to historic lows.
Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce, stated: “The UK’s response to the global energy crisis in 2022 was counterproductive. Instead of boosting domestic supply and attracting new investment in the North Sea, we’ve become more dependent on imports. This hurt the energy sector and its supply chain at a critical time.”
With the risk of a trade war, Borthwick emphasized that the UK cannot afford to make the same mistakes. He noted that the UK is already heavily reliant on imported gas from Norway and LNG from the USA to meet energy demands. He warned that any fluctuations in oil and gas prices could have damaging effects, particularly as returns from North Sea production are already marginal.
He added: “The smart response would be to remove the EPL sooner rather than later, protecting our domestic energy sector and ensuring the UK economy isn’t put at a disadvantage in an uncertain global market.”
Meanwhile, Shell recently rewarded its shareholders with over £18.7 billion in payouts for 2024, while reducing investments in renewable energy. Despite a dip in earnings from £23 billion in 2023 to £19.1 billion in 2024 due to weaker oil prices and lower fossil fuel demand, Shell increased its dividends by 4% in the fourth quarter and announced a £2.8 billion share buyback program, which is expected to be completed by early 2025.
In contrast, BP is cutting costs by laying off thousands of workers globally, including approximately 4,700 roles—about 5% of its workforce of 90,000, with 14,000 based in the UK. BP also plans to reduce its contractor numbers by 3,000.
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