Autumn Statement - PwC comments on oil and gas announcements

Colin Smith, Energy and Infrastructure Tax Partner at PwC UK, said: 

 "The government has announced the removal of certain tax barriers to energy transition-related activities, including those related to carbon capture, usage and storage projects and the decarbonisation of oil and gas production. It reconfirmed that the Energy Profits Levy (EPL) will end no later than 31 March 2028 and confirmed that the related Energy Security Investment Mechanism (ESIM) will be monitored monthly, and its price thresholds adjusted annually in line with CPI. The government stated that it will introduce legislation to give effect to the ESIM in due course.  

“Oil and gas businesses will welcome the confirmations relating to the EPL and the removal of tax barriers related to energy transition activities, but the industry’s enthusiasm may be dampened by the proposals for a new mechanism to ensure 'a fair return for the nation at times of unusually high oil and gas prices', after the existing Energy Profits Levy (EPL) 'windfall' tax ends in 2028. 

“Moving away from oil and gas, the government has announced that the Electricity Generator Levy (EGL) will not apply to generation from a new or expanded electricity generating station where the investment decision is made on or after today, 22 November 2023.  

“It is helpful that the government has listened to businesses and is seeking to remove potential EGL-related barriers to new electricity generation. However, the beneficial impact may be limited, given the long lead time between making a final investment decision and reaching first power, and the EGL sunset date of 31 March 2028."