The UK may be quietly approaching an awkward admission: its trial of a windfall tax on oil and gas has failed.

According to informed sources, the UK Treasury is in discussions with North Sea oil and gas producers about potentially scrapping the Energy Profits Levy (EPL) before its scheduled expiry in 2030. After multiple extensions and rate increases, the tax has pushed the overall tax rate for the sector to 78%—a level producers deem nearly confiscatory, while critics call it almost absurd.

The EPL was introduced in 2022 after Russia's invasion of Ukraine caused oil and gas prices to surge. Initially framed as a temporary measure, it aimed to capture excess profits and ease pressure on households. However, prices have since retreated, yet the tax has remained and even expanded.

Under current rules, the levy could end early if the six-month average prices of oil and gas fall below preset thresholds ($78.65 per barrel for oil and 61 pence per thermal unit for gas) for 2026–2027. Otherwise, it will remain in force until March 2030.

Industry opposition was expected. Offshore Energies UK has warned that the tax could cause long-term damage to domestic production. Under the expanded tax regime, Harbour Energy saw nearly all its 2022 profits wiped out, forcing job cuts and project delays. BP and Shell have publicly reviewed their UK investment plans. TotalEnergies has also reduced spending.

Politically, the issue is a minefield. The Labour Party must balance climate goals with energy security, jobs, and growing pressure from Nigel Farage’s Reform UK, which has pledged to abolish the tax entirely. Meanwhile, the Green Party wants to make it permanent, and the Scottish National Party argues it threatens tens of thousands of jobs in the North Sea.

There is also a strategic backdrop. Both the UK’s grid operator and the national system operator have warned that reduced domestic production could increase reliance on imports, leaving the country more exposed to supply shocks.

For the UK Continental Shelf, some are left wondering whether this tax is quietly hastening the decline of a basin already struggling against the tide.