THE Labour Government has launched a consultation on plans to scrap the windfall tax when it comes to an end in 2030.
The Energy Profits Levy (EPL) was introduced in 2022 after companies recorded skyrocketing profits due to a sharp rise in energy prices.
Since then, energy firms have faced lower than expected profits, prompting a shift from renewable energy to fossil fuels and natural gas.
The tax was increased in last year’s Budget and means oil and gas producers are paying a headline tax rate of 78%.
The consultation seeks views on a new tax which would be triggered either when energy prices or profits are exceptionally high.
The department for energy security and net zero said it would work to develop a plan that would deliver a "fair return for the nation during times of unusually high prices".
The department pledged to consult on a "new regime" for the industry in the North Sea, confirming new licences for oil and gas fields would not be approved.
This comes after the UK Government admitted plans for the Rosebank oil field off Shetland had been approved unlawfully after the decision was challenged in court by environmental campaigners.
Energy Secretary Ed Miliband said: "The North Sea will be at the heart of Britain's energy future. For decades, its workers, businesses and communities have helped power our country and our world.
"Oil and gas production will continue to play an important role and, as the world embraces the drive to clean energy, the North Sea can power our plan for change and clean energy future in the decades ahead."
Oil and gas companies had posted record profits after wholesale prices spiked amid Russia's invasion of Ukraine.
The EPL was introduced by the previous Conservative government, which set the rate at 25% and put it in place until 2025. It was later increased to 35% by then-chancellor Jeremy Hunt and would run until at least 2029.
The latest rise prompted the US-based firm Apache to announce it would end its North Sea operations by 2029.
The company described the financial impact as "onerous," adding continuing to operate in the area would be "uneconomic".
The price per barrel of oil has since fallen significantly.
This comes after more than a dozen oil and gas companies have been investigated by HMRC for underpaying taxes on energy profits.
According to information obtained by a Freedom of Information request, 14 oil and gas companies have been investigated by HMRC for suspected underpayment of the Energy Profits Levy.
