Trump: UK’s North Sea Strategy a ‘Big Mistake’
U.S. President-elect Donald Trump has criticized the U.K.'s energy tax policies in light of recent announcements by U.S. oil firm Apache to exit the North Sea. "The U.K. is making a very big mistake. Open up the North Sea. Get rid of Windmills!" Trump declared, underscoring his disapproval of Britain's windfall tax and support for renewable energy over fossil fuels.
Apache's North Sea Exit
Apache, a subsidiary of APA Corporation, announced plans to cease all operations in the North Sea by the end of 2029, citing financial and regulatory pressures. CEO John Christmann explained that the U.K.'s Energy Profits Levy (EPL)—a windfall tax—had rendered its North Sea operations "uneconomic."
The Texas-based company also pointed to new emissions control regulations requiring substantial investment for compliance beyond 2029. "After six months of evaluation, we have concluded that the investment required to comply with these regulations... coupled with the onerous financial impact of the Energy Profits Levy makes production of hydrocarbons beyond the year 2029 uneconomic," Christmann said.
Apache has operated in the North Sea since 2003, managing key assets like the Forties field. However, new drilling activity was suspended last year, and the company plans a limited capital program before transitioning to asset decommissioning.
Breaking Down the 78% Tax Rate
The Energy Profits Levy was increased to 38% by the Labour government, with its duration extended until 2030. This levy applies to the profits of oil and gas companies operating in the U.K. However, this is only part of the tax burden.
Ring Fence Corporation Tax (RFCT): A 30% tax applied specifically to profits from oil and gas extraction, separate from standard corporate tax.
Supplementary Charge: An additional 10% tax applied to the same profits.
Together, these taxes create an effective rate of 78%, making the U.K. one of the most heavily taxed environments for oil and gas production globally.
Industry Reaction
Industry leaders have expressed alarm over the impact of these tax policies. Russell Borthwick, CEO of Aberdeen and Grampian Chamber of Commerce, warned that the windfall tax would drive investment and jobs away from the North Sea. "We have been warning for almost two years now that the windfall tax would drive capital, investment, and jobs away from the North Sea," Borthwick said. He called for a "new progressive tax regime" that adjusts rates based on oil and gas prices, providing the industry with stability and predictability.
Energy Security Concerns
Trump’s remarks highlight broader concerns about energy security. Apache’s decision to exit the North Sea comes amid a global push for net-zero emissions. However, critics argue that policies like the windfall tax could undermine domestic energy production, increasing reliance on imports and leaving the U.K. vulnerable to energy supply disruptions. This issue has taken on heightened urgency with the ongoing war in Ukraine, which has exposed the risks of depending on Russian gas exports and underscored the need for energy resilience among Western allies.
Balancing Net-Zero Goals and Energy Production
While the U.K. government aims to meet its net-zero targets, industry representatives stress the importance of maintaining a robust domestic energy sector. They argue that fostering a predictable regulatory and tax environment is essential for encouraging investment and innovation in both traditional and renewable energy sources.
As Apache prepares to wind down its North Sea operations, the debate over balancing climate ambitions with energy security is likely to intensify in the years ahead.
