US oil giant Apache abandons North Sea over windfall tax - what now for Scotland?

US oil firm Apache will abandon its North Sea operations by the end of the decade, blaming the UK’s windfall tax regime for making their operations “uneconomic”.

Texas-based Apache has announced a cessation of all production at UK assets by December 2029, “well ahead of what would have been an otherwise reasonable time frame."

Officially the ‘Energy Profits Levy’ (EPL), the windfall tax scheme levies profits made from extracting UK oil and gas.

Chancellor Rachel Reeves raised the rate by three percentage points to 38%, a move Aberdeen and Grampian Chamber of Commerce has said puts the tax burden on Apache and similar firms at 78%.

EPL has also been extended by a further year to 2030.

Apache said changes to windfall tax make production in the North Sea "uneconomic" | Canva / Getty

However, the Treasury has pointed to the Energy Security Investment Mechanism, which means the EPL will no longer apply it prices fall back to historically normal levels for a sustained period.

Apache parent company APA’s chief executive John Christmann said: “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.”

In an official statement, an Apache spokesperson added: "The onerous financial impact of the EPL, combined with the substantial investment that will be necessary to comply with regulatory requirements, makes production of hydrocarbons beyond 2029 uneconomic.

"Looking forward, our focus will be on maintaining asset safety and integrity as we prepare for the responsible decommissioning of our assets.”

Russell Borthwick, chief executive at Aberdeen and Grampian Chamber of Commerce, urged the UK Government to take urgent action.

He said: "We have have been warning for almost two years now that the windfall tax would drive capital, investment and jobs away from the North Sea.

"The UK Government must now work with industry swiftly to devise a new progressive tax regime for the North Sea, where the tax rate increases as oil and gas prices rise and decreases when prices fall.

"This framework should be predictable, allowing the sector to make future investment plans with certainty and confidence.

"This successor regime cannot wait until beyond 2030, by which time significant damage could be done to our domestic energy industry and its workforce. It should be pursued immediately."

And the SNP criticised Labour’s tax regime as “the worst of all worlds”.

The party’s economy spokesperson, Dave Doogan MP, said: "The Labour Party have put our skilled offshore workforce at risk and are actively draining investment, risking our energy security and our ability to hit net-zero – it’s potentially the worst of all worlds.

"The simple truth is that you cannot meet net-zero, and you certainly cannot create green growth, if your plans hack away at both investment and the domestic workforce you need to deliver the energy transition.”

A UK Government spokesperson responded: “We are committed to making the UK a clean energy superpower, with both public and private investment required to support the transition, enhance energy security, and provide sustainable jobs of the future.

“To that end we secured £24 billion for green industries at the International Investment Summit and have made changes to the Energy Profits Levy that recognise the oil and gas sector’s role in the UK’s energy mix while asking it to contribute more to the transition - helping to fund GB Energy based in Aberdeen.”