EnQuest warns windfall tax makes North Sea oil globally uncompetitive

EnQuest warned that Britain's windfall tax on oil and gas has made North Sea production globally uncompetitive and threatens the United Kingdom’s energy-transition ambitions. In a six-month update to September 24, the Aberdeen-based producer reported a statutory net loss of $173.5 million, reflecting a $123.9 million non-cash adjustment tied to the two-year extension of the Energy Profits Levy.

Labour’s 2024 Autumn Budget raised the EPL to 38% and scrapped the 29% investment allowance for new North Sea projects, lifting the UK’s headline tax rate on oil and gas to about 78%—one of the highest in the world. The Office for Budget Responsibility has warned that capital expenditure in offshore energy would decline in the coming years, with oil and gas production projected to fall by about 6.3% and 9.2%, respectively. The OBR has also accepted that no windfall currently exists for oil firms, noting Brent crude prices remain near historic norms at roughly $67 per barrel, well below the 2022 spike. These dynamics have fed concerns that investment is migrating away from the UK.

EnQuest said it remained committed to UK investment but signaled a near-term pivot to outside the UK to optimize value in a tougher policy environment. Chief executive Amjad Bseisu said: "We are committed to continued investment in our UK business, targeting material, value-enhancing growth. 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." He added: "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."

EnQuest shares were down 3.1% to 11.38p in early trading, bringing 2025 losses to about 11.4%. Research analyst James Hosie at Shore Capital said: "EnQuest's H1 financial results are fundamentally in line with our estimates, while the operational performance has been very strong across the portfolio. With full year guidance unchanged we expect the results presentation to focus on management's growth ambitions in both the UK and SE Asia. In particular, the release highlights the path to quadrupling net production in SE Asia to around 35 thousand barrels of oil equivalent per day by FY30F. We reiterate our Buy rating with a fair value estimate of 28p per share."

The policy backdrop is pressing a broader debate about the North Sea’s investment climate. Earlier this year, the Government consulted on a new permanent Oil and Gas Price Mechanism to replace EPL when it ends in 2030. The mechanism is intended to tax unusually high energy prices to ensure a fair return for the nation during price shocks while still protecting investment in the North Sea. EnQuest framed the proposal as a potential catalyst if designed with predictability and revenue-raising safeguards that do not suppress exploration and production.

The company has argued that a clear, domestically focused framework could both revive investment and bolster Treasury receipts, while helping to safeguard jobs across the sector. Bseisu emphasized that policy stability could counterbalance volatility in global energy markets, noting that price cycles have historically affected downstream activity and exploration timelines.

The broader market reaction to policy shifts and EnQuest’s results underscores ongoing investor sensitivity to the fiscal regime governing UK oil and gas. The country already faces scrutiny over whether the North Sea can attract the investment necessary to sustain output as older fields decline. Proponents of reform say a balanced approach could preserve critical energy security and funding for the transition to cleaner energy, while critics warn that excessive taxation risks driving capital away and hastening asset divestment.

In the near term, observers will watch for how the EPL replacement mechanism, now under consultation, will be framed to avoid punitive effects on investment while ensuring the Treasury secures a fair share of profits during price spikes. The success of any reform will hinge on delivering a predictable framework that aligns government revenue goals with the need to preserve North Sea activity and, by extension, domestic energy resilience.

As EnQuest and peers navigate this fiscal minefield, the long-run question remains: can policy design reconcile tax take with incentives to invest in a complex, capital-intensive basin that has supplied Britain with secure energy for decades? The answer will shape the trajectory of the UK’s oil and gas sector—and the pace of its energy transition—for years to come.