The North Sea: reclaiming Britain’s offshore legacy before the lights go out

The death of Sir Ian Wood on 26 July, and bp’s announcement on 31 July that it will sell its North Sea assets, mark the end of an era. In 1967, Sir Ian took over the family business and turned it into an oil services giant. In the same year, bp began the first commercial North Sea production, from the West Sole gas field. Now Britain’s new prime minister Andy Burnham has to ensure the North Sea’s 60th birthday is a celebration, not an epitaph.

Britain’s offshore oil and gas sector has become uninvestable. Labour and Conservative governments alike have delivered years of poor — and what is worse, inconsistent — policy on a crucial national asset. No exploration wells were drilled last year, for the first time since 1964. New licensing rounds have been blocked.

The price of uncertainty

The ‘energy profits levy’ imposes punitive levels of taxation. The headline rate of tax — 78% — may be the same as Norway’s. But that overlooks the Nordic state’s far superior policy consistency, active ongoing licensing programme, greater remaining resource base, and the more favourable fiscal allowances.

This is a failure across the political spectrum. Shadow Energy Secretary and Aberdeenshire MP Andrew Bowie claimed, “Only the Conservatives have a plan to get Britain drilling again by ending the licence ban, scrapping the energy profits levy paid for by cancelling net zero projects.” He conveniently omits the party that introduced the levy under Prime Minister Boris Johnson in 2022.

The cost of decline

From 370,000 workers in the offshore oil and gas sector in 2015, only 110,000 remained by 2025. Many of these were high-skilled, well-paying positions. Scotland has been particularly hard-hit. For all the crocodile tears shed over the coal miners left on the scrapheap by Margaret Thatcher, left-wing activists have shown less sympathy for oil and gas workers. Notwithstanding its success, the UK wind power industry employs about 55,000, estimated to rise to 112,000 by 2030. Fewer than 14,000 work in solar power, a large part of that in London.

The most successful firms on the UK continental shelf are now looking elsewhere. As capital flees, Enquest announced a major acquisition in Malaysia in June; in July, Serica Energy agreed to buy Pharos, a company operating in Vietnam and Egypt. Of the basin’s mainstays, Shell has already combined its assets with Norway’s Equinor; TotalEnergies merged its UK E&P unit with Repsol, and private equity-backed NEO Energy. bp was the last supermajor to retain a standalone business.

Why the North Sea still matters

Declining production in the North Sea is inevitable, but the rate of decline is not. The 2010 discovery of the Johan Sverdrup field, one of the largest ever found in Norway, shows that even mature basins can spring surprises. The 500 million barrels in the UK’s largest undeveloped field, Rosebank, have sat around off the west of Shetland since it was discovered in 2004.

The good reasons for reviving UK oil and gas exploration and production have been well-rehearsed. It would sustain employment, especially in Scotland, generate badly needed tax revenues, and improve the balance of payments. It would almost certainly be lower carbon than importing hydrocarbons, especially liquefied natural gas. The extra production will add only minimally to global emissions; most will displace oil and gas that otherwise would have been imported.

Maintaining North Sea infrastructure is crucial for future uses, particularly for carbon capture and storage (CCS). Once decommissioned, it will be very expensive to reconstruct. CCS is an essential part of any realistic path to net zero for the UK, for dealing with unavoidable industrial emissions from sources such as chemicals and cement plants. Skilled petroleum professionals are essential for future low-carbon industries such as CCS, geothermal, and hydrogen.

A political opportunity

As the turmoil in the Gulf continues, Russia remains an adversary, and oil and gas prices stay rather high, the economic and energy security benefits of more domestic production should be an easy political win for Mr Burnham. He campaigned on re-industrialising left-behind parts of the country. Energy secretary Ed Miliband has been appointed foreign secretary; his replacement, Miatta Fahnbulleh, may be equally supportive of net zero but is less politically influential.

Labour has also gained in the polls recently against the Greens, solidifying Mr Burnham’s left flank. As a record heatwave and drought sweep Britain, and apocalyptic wildfires overshadow France in smoke, it is easy to make the case for stronger climate policy too. Done right, low-carbon policies will deliver economic growth and investment and, eventually, reduced energy bills.

There is no need to fall prey to the “lump of money” fallacy and assume that promoting low-carbon energy is in opposition to domestic oil and gas production. Private companies fund offshore petroleum exploration and production. Solar and wind are mature technologies that should not require large subsidies. The UK has more than enough finance and talented people to make a success of all viable energy sources.

Reconciling climate and hydrocarbons

Mr Burnham could draw on a few creative options to manage the apparent tension between tackling climate change and supporting oil and gas development. One, promoted by Oxford University climatologist Myles Allen in a recent Financial Times article, is the carbon take-back obligation. Companies producing hydrocarbons in the UK would be required to capture a rising share of the resulting emissions, reaching 100% by 2050.

An alternative, or complement, would be to hypothecate offshore petroleum taxation to green objectives — for instance, funding the conversion of the UK building stock to heat pumps and high levels of energy efficiency. That would tackle emissions at the source and give the public a very visible benefit in the shape of lower bills.

A Britain overloaded with debt, struggling for growth, burdened by high bills, and sweltering in endless heatwaves, needs bold and creative climate and energy solutions. The North Sea is not what it was in the heyday of bp and Sir Ian, but it is not dead yet.