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The Offshore Energies UK (OEUK) Business Outlook report found that nine in 10 North Sea operators are cutting investment, citing a combination of high taxes, political uncertainty and inflation as key factors in their decisions.

The report comes after extraordinary taxes imposed on North Sea oil and gas operators, under which their general tax rate increased from 40% to 75% in 10 months.

The windfall tax, officially called the Energy Profit Levy, was introduced last year to ensure that oil and gas producers in the UK’s North Sea could not profit massively from the war in Ukraine.

The report says the investment cuts mean the UK’s potential oil and gas resources have been immediately degraded, with 500m barrels cut from the amount likely to be produced, enough to sustain the nation for six months. .

However, the UK’s overall reliance on oil and gas has increased.

The UK derived 73% of its total energy from oil and gas in 2020, however this increased to 75% in 2021 and 76% last year.

Ross Dornan, OEUK Market Intelligence Manager, said: “Our report shows that there is no simple choice between oil and gas on the one hand and renewables on the other.

“The reality is that to keep the lights on and grow our economy, we need both. By the mid-2030s, according to the Committee on Climate Change, oil and gas will continue to cover half of our energy needs.

“We should aim to get as much of that energy as possible from our own resources, that is, from the North Sea.

“That makes it essential for the UK to attract investment. The alternative is to depend more and more on other countries. Without investment, we risk having to import not only our daily energy, but also the equipment and expertise required to reach net zero.

“That net zero transition will need £1.4 trillion of investment, which should benefit British businesses and workers. But the current extraordinary levies and political statements about the future of such levies risk scaring away that investment.

“They give the Treasury a short-term boost in terms of tax revenue, but the long-term impacts could be disastrous for consumers and the economy.”

The report also suggests the UK is far from reaching its 2050 net-zero emissions target, which it links to what it describes as long-term political inertia on reducing demand for oil and gas, especially heating and transport.

It finds that OEUK member companies are advancing offshore wind projects that would nearly double the UK’s capacity, spending £30bn by 2030.

However, he warns that decade-long waits for planning consent and grid connections, plus financial uncertainties related to windfall taxes, are holding them back.

David Whitehouse, chief executive of OEUK, said he expects a “substantial” prize if the situation is handled correctly.

He said: “We can continue to have secure energy powering and heating our homes, transport and industry.

“We can have a vibrant and thriving offshore energy sector that boosts the economy, supports hundreds of thousands of highly skilled jobs and reduces UK emissions.

“This approach will not only get us to net zero faster, it will also make the UK economy richer in resources and talent, supporting governments and society with cleaner, safer and more efficient home-produced energy. more affordable.

“But this opportunity hangs by a thread.”

The report, published on Tuesday, also finds that UK oil and gas production is shrinking, with gas production down 7% and oil down 26% since 2018, which it attributes to falling prices. investment and regulatory delays.

A spokesman for the Department for Energy Security and Net Zero said the UK government’s plans would “maintain the UK’s place as a world leader in working towards net zero while boosting the economy.”

“The UK economy has grown by 65% ​​and reduced emissions by 48% between 1990 and 2021, decarbonising faster than any other G7 country,” the spokesperson said.

“Our plans to invest in renewable and nuclear technologies will also support up to 480,000 good-paying green jobs and secure up to £100bn of private investment by 2030.

“All of this is also reinforcing our energy security and independence, helping to ensure that we can reduce wholesale electricity prices to one of the lowest in Europe.”

A UK government spokesman said: “The Energy Profits Levy strikes a balance between funding cost-of-living support from excess profits while encouraging investment to strengthen UK energy security.

“We have made it clear that we want to encourage the reinvestment of profits from the sector to support the economy, jobs and our energy security, so the more a company invests in the UK, the less tax it will pay.”

A Scottish government spokesman said: “We have set out a path, through our draft energy strategy and just transition plan, to ensure a fair and just transition for our energy workforce and bring a new generation of skilled workers to the Energetic industry.

“The draft strategy sets out a very clear vision to capitalize on the tremendous opportunities that a net-zero energy system offers industry, our economy and our climate.”