The UK's leading offshore-energy producers will today give Chancellor Jeremy Hunt a stark warning that the windfall levy will risk causing a rapid reduction in investment and jobs - and in the country's production of oil and gas.
They will tell him that the new 75% tax rate imposed on the industry is already deterring investment.
Just last week, TotalEnergies became the first major operator to announce it is cutting spending as a direct result of the UK Government's increased cash grab.
The head of the French group's North Sea business said it will slash investment by a quarter next year - a £100million fall.
Mr Hunt targeted offshore producers in his recent Budget. He is hiking the existing windfall tax by another 10% to 35% - bringing the overall tax rate from January to an eye-watering 75%.
The chancellor has also extended the lifespan of the levy until March 2028 from the previous date at the end of 2025.
£40billion target
The government expects the windfall cash grab to raise a total of £40billion - double the previous figure of £20billion. The total tax take from producers operators in British waters in the next six years will hit a staggering £80billion.
Today's meeting in Edinburgh marks the reinstatement of the Fiscal Forum - a group that brings together the UK Treasury, led by Mr Hunt, oil and gas producers, and trade body Offshore Energies UK (OEUK).
The forum's aim is to find ways to support the country's energy security and economy by maximising the output of oil and gas.
OEUK will warn that, without investment, UK gas production could halve by 2030 - leaving the UK highly dependent on imports. Last year the UK produced about 38% of the gas it consumed.
The trade body's key point is that windfall taxes should only apply to windfall profits - so if prices and profits decline the tax should be scrapped. This is a view widely shared across the industry.
Deirdre Michie, OEUK's chief executive, will ask the chancellor to:
- Scrap the windfall tax on homegrown energy when oil and gas prices fall back to normal levels
- Rebuild investor confidence - starting with a lasting, predictable tax regime that supports consumers and industry
- Engage with the industry long-term - including building a lasting consensus with other political parties and stakeholders
Ms Michie said: "We are very concerned about the impacts of this tax on our industry and on the UK's energy security. We want to make Mr Hunt aware of those impacts and work with the government to minimise the damage it is doing.
"At the moment our members produce nearly 40% of the nation's gas. We can only maintain that kind of output by constant investment. It means we spend billions of pounds a year on exploration, drilling, installing platforms and pipes and many other types of equipment. It is an extremely high-risk industry.
"Our message to Jeremy Hunt is that the windfall tax has made it far riskier - to the point where energy companies are deciding to invest overseas rather than here.
"So we are asking for his explicit support so that the offshore industry can provide energy for consumers now as well as building the low-carbon energy systems of the future.
"This is a potential slow disaster for the UK. If investment falls now, then in a few years' time our gas and oil production will plummet and we will become ever more reliant on imports. And if we produce less oil and gas then we will also be producing less jobs and, ironically, far less taxes."