One of the North Sea’s biggest oil producers has slammed the UK Government’s tax regime for the area, declaring that it is “causing irreversible damage to an indigenous and strategically important UK industry”.

EnQuest, which holds big stakes in the giant Magnus and Kraken fields, is the latest major player to speak out after the Labour Government said it will increase the windfall tax on extraordinary oil and gas company profits and remove “unjustifiably generous investment allowances”.

It follows hard on the heels of a decision by fellow North Sea player NEO Energy this week to “materially slow down” investment across all of its development assets, declaring that the measures taken by the Labour Government have increased “uncertainty” for the sector.

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And in an interview published in The Herald yesterday, the boss of North Sea giant Serica Energy, Chris Cox, warned it may move into “run-down” mode if the industry’s worst fears about the tax regime are realised when Chancellor of the Exchequer Rachel Reeves announces the Government’s Autumn Budget on October 31. While the Government has said it will abolish the investment allowance brought in with the levy, details of its plans to reduce the capital allowance will be announced in the Budget.

"We are disappointed with the ongoing application of the energy profits levy despite operating in an environment where no windfall conditions exist,” said EnQuest chief executive Amjad Bseisu.

“The current fiscal regime is causing irreversible damage to an indigenous and strategically important UK industry. The UK energy industry needs a progressive tax regime that recognises the maturity of the North Sea and re-establishes the UK as a globally competitive investment basin.

“The oil and gas sector is the key to a just energy transition, protecting the skills, jobs and resources required to deliver the decarbonisation projects of the future and, with stability and the right fiscal stimulus, can deliver material UK economic growth through billions of pounds of investment-ready projects. EnQuest has to date invested over £4 billion in the UK and has the capacity and opportunities to do so again.”

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The Labour government has said it will increase the EPL by 3%, lifting the headline tax rate on oil and gas company profits to 78%, while extending the sunset clause by one year to 2030. It will also remove or reduce significant tax incentives which the industry says have been important in giving firms the confidence to invest in new technology that can support the drive to net zero.

North Sea stakeholders are concerned the approach taken Sir Keir Starmer’s government risks the loss of tens of thousands of jobs in the oil and gas industry and its supply chain and undermine the transition to cleaner energy systems.

The comments from EnQuest came as shares in the company closed down more than 5% after the firm warned production for the year will come in towards the lower end of guidance.

First-half production dipped to 42,771 barrels of oil equivalent per day from 45,480 boepd in the first half of last year. EnQuest noted that strong uptime across the portfolio was offset by minor delays to the Magnus five-yearly rig certification programme, and the previously reported failure of an infill well on the non-operated Golden Eagle asset.

Full-year production is now expected to be in the lower half of the 41,000 to 45,000 boepd guided range set at the start of the year.

EnQuest, which also has operations in Malaysia, made a profit after tax of $30.3 million for the six months ended June 3, following a loss of $21.2m over the same period last year.

It reduced net debt by $159.9m to £321m by June 30.

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Mr Bseisu said: “The group's growth strategy remains robust, with a focus on delivering a transformative UK acquisition; utilising our differentiated operating capability and significant tax asset to deliver material incremental value. Given the prevailing tax regime, we are targeting UK portfolios with limited capital reinvestment programmes.

“Internationally, we are working on a number of growth opportunities in South East Asia where the return on capital investment is compelling.

“The work we have done over the past seven years to strengthen our balance sheet gives us choices, and we will continue to make value-adding strategic decisions for our shareholders."

Shares in EnQuest closed down 5.37% at 11.64p.