Labour windfall oil and gas tax 'could affect investment'

The party is proposing that these companies pay into a 'just transition' fund, providing training and a "new, unionised job on equivalent terms and conditions" to workers in the oil and gas industry, alongside a supporting strategy, according to its manifesto.

Oil and gas expert Martin Ewan of Pinsent Masons, the law firm behind Out-Law, said that the industry was already "acutely aware of the challenges it faces and the need to diversify". Industry body Oil and Gas UK recently published plans to reduce or offset carbon emissions from the sector to net zero by 2050 in the UK and 2045 in Scotland, through a combination of reducing emissions from production and developing low carbon technologies such as carbon capture usage and storage and hydrogen gas at commercial scale.

Around 75% of the UK's current energy needs are met from oil and gas, most of which is produced domestically, according to Oil and Gas UK. The independent Climate Change Committee has estimated that even with the transition to renewables, the UK will still consume the equivalent of around 65 million tonnes of oil annually by 2050.

"The UK's biggest players are already prioritising investments in their renewables and cleantech divisions, as well as cross-training skilled workforces," Ewan said. "But it's extremely important to recognise that the industry still plays a vital role in the UK's energy landscape, which often seems forgotten."

"This tax levy will be a significant concern to oil and gas companies, and could divert investment being spent on the continued innovation to make infrastructure, and the eventual decommissioning processes, as efficient, safe and sustainable as possible," he said.

Labour has pledged to reduce UK energy carbon emissions to net zero "within the 2030s", and for nearly 90% of electricity and 50% of heat to come from renewable and low carbon sources by 2030.