UK’s North Sea oil and gas explorers said they would have to rethink investment after Britain’s decision to raise windfall tax on the fossil fuel industry. Shell and Equinor said they were evaluating investment plans after last week’s decision to raise tax from 25% to 35% to help ease Britain’s fiscal woes. The UK government’s Energy Profit Levy (EPL) was also extended from 2025 to 2028, allows firms to deduct investments in new oil and gas projects and some carbon reduction projects. It will bring total taxes on the oil and gas sector in Britain to a rate of 75%, among the highest in the world.

Shell said it would re-evaluate its $30 billion investment plans in Britain due to the EPL, and added that it should provide incentives to address supply shortages as well as investments in renewables.

Norway’s Equinor said the tax was affecting investor confidence negatively.

“Uncertainty makes it harder to take investment decisions, especially the uncertainty around the longevity of the EPL,” Equinor said in a statement.

Britain has been looking to ramp up domestic energy production after volatility in energy prices last year caused by Russia’s invasion of Ukraine.

Equinor is set to make a final investment decision on the Rosebank project in the North Sea, one of the largest developments in recent years, in the first quarter of 2023. The field is expected to produce 70,000 barrels of oil equivalent per day (boed) at its peak.

The Rosebank project is estimated to bring £26.8 billion to the British economy through tax payments and investments, Equinor said.

Industry association Offshore Energies UK said the tax hike could cause a drop in production in the coming years without government support for further exploration.

The EPL means some companies could shut down depleted fields earlier than planned because they become uneconomical, the industry body said.