Prolonged high oil and gas prices and the new windfall tax mean the UK Government could soon set a new record for tax receipts from the sector.
Analysis carried out by the Office for Budget Responsibility has proceeds from the industry hitting £20.7 billion in 2023-24.
Just over half of that, £10.8bn, will be as a result of the windfall tax.
If takings do hit that level, it would be “an all-time high for oil and gas revenues in cash terms”, and the “highest as a share of GDP since 1985-86”.
The uptick in estimations has predominantly been driven by expectations that the gas price will remain at historic highs for quite some time.
Since its March calculations, the OBR has almost doubled its forecast for oil and gas receipts in 2022-23 to £14.9bn.
But the pubic body has caveated its predictions by pointing out that “volatility in energy prices” means these revenues are “particularly uncertain”.
As feared by industry, the chancellor Jeremy Hunt raised the rate of windfall tax for oil and gas companies by 10%, to a total of 35%, on Thursday.
In its economic and fiscal outlook, the OBR said that gas prices are “expected to peak at £3.70 a therm” in q1 of 2023.
That is around 80p a therm higher than the peak in its March forecast.
Prices are then expected to fall back sharply and settle at £1.90 a therm in the final quarter of 2025.
Oil meanwhile is “little changed” since March’s prediction of $85 a barrel, but “but the weaker pound means the cost of oil is up by 19 per cent in sterling terms,” the OBR said.
Taken with the heightened windfall tax take- now at 75% – the UK Government said North Sea firms are expected to pay “around £80 billion in tax over the next six years”.
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