UK North Sea Oil Enters Survival Mode as Investment Dries Up

Core Insights - The UK North Sea oil and gas industry faced significant challenges in 2025, marking the most difficult year since the 1960s when hydrocarbons were first discovered in the region [1] - Production from mature fields continued to decline, and uncertainties regarding government policy led to reduced investments and frozen plans among operators [2] - Exploration activity in the UK North Sea reached an all-time low, with no exploration wells drilled in 2025, a first since 1960, due to unpredictable fiscal policies [3] Investment Climate - The UK oil and gas industry received clarity on the fiscal regime at the end of 2025, but the windfall tax remained unchanged until 2030, which the industry argues is detrimental [4][5] - The total tax rate, including the windfall tax of 78%, is seen as excessively burdensome, leading to concerns about the industry's viability and its supply chain [5][6] - The Energy Profits Levy (EPL) was triggered by oil prices above $76 per barrel or natural gas prices above 59 pence per therm, with gas prices remaining above the threshold, resulting in a 35% windfall tax on profits [6] Industry Sentiment - The sentiment within the industry is pessimistic, with expectations that continued declines in investment and exploration could lead to increased reliance on oil and gas imports, exposing the UK to volatile international markets [7] - The windfall tax, initially introduced during the 2022 energy crisis and extended under the current government, is expected to eliminate non-essential investments in the UK shelf, as companies may seek friendlier tax jurisdictions [8] - Industry leaders have criticized the government's decision to maintain the windfall tax, stating it has cost the UK £50 billion in potential investments and jeopardized jobs and industries [9]