EnQuest warns windfall tax makes North Sea oil globally uncompetitive
Oil firm says UK policy regime risks driving investment abroad as it calls for policy reform
EnQuest PLC warned that the government's windfall tax has made North Sea oil globally uncompetitive and called on Labour to act now to protect Britain's energy transition ambitions. The Energy Profits Levy, introduced in 2022 after spikes in oil and gas prices driven by Russia's invasion of Ukraine, has been extended by two years. When combined with the 38% levy introduced by Labour in the 2024 Autumn Budget and the removal of the 29% investment allowance for new North Sea projects, UK producers face a headline tax rate of about 78%, among the world's highest.
EnQuest reported a statutory net loss of $173.5 million for the six months to Sept. 24, including a $123.9 million non-cash adjustment tied to EPL extension. This compares with a $30.3 million net profit in the prior six months.
"We are committed to continued investment in our UK business, targeting material, value-enhancing growth," said Amjad Bseisu, EnQuest chief executive. "Our near-term pivot to investment outside of the UK underlines, however, how successive UK Governments have made the UK North Sea globally uncompetitive through fiscal policy. The UK remains the only country worldwide levying a windfall tax on energy profits, in an environment where even the Office for Budget Responsibility acknowledges that prices are at, or below, historic norms and therefore no windfall exists."
The government has signaled support for a permanent 'Oil and Gas Price Mechanism' to replace EPL when it ends in 2030. Officials say the mechanism would tax unusually high prices to secure a fair return for the nation while preserving North Sea investment.
"The UK Government now has a tool with which to revitalise this sector; materially increasing investment and tax revenues to Treasury, improving the UK's energy security in a volatile macro environment, and protecting jobs across the country, which are currently being lost at a rate of 1,000 per month. We implore the Government to act now to avoid the accelerated decline of this industry and the resulting death of the UK's energy transition ambitions," Bseisu added.
EnQuest shares fell 3.1% to 11.38p in early trading, extending 2025 losses to about 11.4%. Shore Capital analyst James Hosie said the H1 results were broadly in line with estimates, with the portfolio delivering strong operational performance and a focus on growth in the UK and Southeast Asia. He noted a roadmap to quadruple net production in Southeast Asia to around 35,000 boe/d by fiscal 2030 and reiterated a Buy rating with a fair value of about 28p per share.
In broader context, the Office for Budget Responsibility has warned that UK upstream capital expenditure could fall by around 26% in the coming years, with oil and gas production projections down by roughly 6.3% and 9.2%, respectively. The OBR also acknowledged that Brent crude prices had fallen from their 2022 peaks, trading around levels seen before the surge. The UK is the only major oil producer to maintain a windfall-style levy, a point cited by EnQuest in arguing for policy reform.
This development comes as the government continues consultations on the proposed Oil and Gas Price Mechanism, intended to be the permanent framework after EPL expires in 2030. Officials say the mechanism would maintain resilience during price shocks while ensuring a fair return for the nation and preserving incentives to invest in the North Sea.