UK plans to overhaul windfall oil and gas tax

LONDON (Reuters) -Britain plans to overhaul its windfall tax regime on oil and gas producers once current levies run out in 2030, it said on Wednesday as it vowed to transform the North Sea into a renewables hub.

The government is asking industry players and others to provide feedback until May 28 on policy options including taxing what it calls "excess revenue".

This plan would not be applied to oil and gas market prices but rather the actual price producers receive after the use of financial products commonly employed to shield them from price fluctuations, according to the consultation document.

In October, Britain's Labour government upped its windfall tax on North Sea oil and gas producers to 38% from 35% and extended the levy by a year to March 2030, bringing the headline tax rate on the sector to 78%, among the highest in the world.

A 25% windfall tax was first introduced by the previous Conservative government in May 2022 in the wake of soaring energy prices following Russia's invasion of Ukraine. The tax was subsequently increased to 35% in November 2022, and extended by one year in March 2024.

Oil and gas producers have argued that the windfall levy has hit profits and brought uncertainty over investments, hastening an already advanced decline of oil and gas output in the British North Sea.

Energy minister Ed Miliband said that oil and gas production would continue to play an important role in the energy mix, and the government was committed to maintaining existing fields for their lifetime.

Wednesday's plans reiterate the government's intention not to allow any new oil and gas licenses.

Alongside oil and gas production, the government also wants to ensure that clean energy sources such as hydrogen, carbon capture and wind start to thrive, creating new jobs.

(Reporting by Muvija M, Sam Tabahriti, Shadia Nasralla; Writing by Shadia Nasralla and Sarah Young; Editing by Sachin Ravikumar and Christina Fincher)