UK eases North Sea oil and gas licensing for existing fields

Core Insights - The UK Government has shifted its North Sea oil and gas licensing policy, allowing production near existing fields and infrastructure while maintaining the windfall tax regime, disappointing producers [1][2][3] Licensing Policy Changes - The Department for Energy Security and Net Zero (DESNZ) announced that new oil and gas licenses can be issued if they are connected to current fields or infrastructure without requiring new exploration, marking a partial easing of previous restrictions [2] - This policy change comes amid the Labour Government's pledge to halt new oil and gas licensing in pursuit of net-zero targets [2] Tax Framework and Industry Response - The government confirmed no changes to the existing tax framework, which includes a 38% windfall levy when prices exceed certain thresholds, leading to a total tax burden of up to 78% for operators [3] - Industry leaders, including Offshore Energies UK CEO David Whitehouse, expressed concerns that the windfall tax must be reformed urgently to attract investment, warning that projects could stall if the levy remains beyond 2026 [4] Production Trends - UK oil and gas output has significantly declined from approximately 4.4 million barrels of oil equivalent per day (mboe/d) at the start of the millennium to around 1 mboe/d currently, with projections indicating a drop below 150,000 mboe/d by 2050 [5] - Many producers are reconsidering their UK operations due to mature field declines, leading to potential sales, mergers, or scaling back of activities [5] Financial Implications of Tax Reform - A statistical analysis by Offshore Energies UK suggests that reforming the Energy Profits Levy (EPL) in 2026 could increase tax receipts by £15.7 billion ($20.7 billion) to £48.6 billion within ten years [6]