Britain will allow some new oil and gas production on or near existing fields, the government said on Wednesday, easing its stance on new licences while dashing oil and gas producers’ hopes for an early end to windfall taxes on their sector.
From an output of around 4.4 million barrels of oil equivalent per day (boed) – similar to OPEC heavyweight Iraq – at the start of the new millennium and a position as a net exporter, Britain now produces around 1 million boed, with a decline to under 150,000 boed seen by 2050, according to UK oil and gas regulator North Sea Transition Authority (NSTA).
U.S. President Donald Trump has been outspoken in his criticism of the UK’s energy policy and efforts to reach net zero greenhouse gas emissions by 2050. Trump has called on the British government to drill more oil from the North Sea and criticised the country’s windfarms.
The Labour government had pledged during its 2024 election campaign that it would stop awarding new oil and gas licences to move toward net zero.
Wednesday’s move allows the government to hand out new oil and gas licences if they do not require new exploration and link back to existing fields and infrastructure, the Department for Energy Security and Net Zero said.
WINDFALL TAX TO REMAIN TO 2030
Presenting its budget on Wednesday, the government announced no changes to one of the world’s toughest tax regimes for oil and gas producers, which includes a windfall levy of 38% when prices exceed government-set thresholds, bringing the overall tax burden in such circumstances to 78%.
Industry had hoped for an early end to the EPL, which is due to expire in March 2030.
“The future of North Sea energy depends on investment, which won’t come without urgent reform of the windfall tax,” said David Whitehouse, head of the Offshore Energies UK industry group.
“If the levy stays in place beyond 2026, projects will stall and jobs will vanish, no matter how pragmatic licensing policy becomes.”
The government has vowed to use the revenue from oil and gas to raise funds for renewable energy projects.
While oil prices have fallen below a government-set threshold for the so-called Energy Profits Levy (EPL), gas prices have been above it. The windfall tax is disabled once both fall below their thresholds, which are regularly updated.
Harbour Energy, a North Sea-focused producer, said it was disappointed in the announcement.
Environmental advocacy group Greenpeace UK applauded parts of the government’s announcement but said it also did not go far enough in supporting North Sea energy workers to get new jobs in renewable energy.
“The government has shown genuine global climate leadership, making the UK the world’s largest economy to call time on new fossil fuel exploration,” said Areeba Hamid, Greenpeace UK’s co-executive director.
The government said on Wednesday the EPL would be replaced in March 2030 with an Oil and Gas Price Mechanism at a rate of 35%, which would apply if oil and gas prices stay above certain thresholds.
(Reporting by Shadia Nasralla, Muvija M, Stephanie Kelly; additional reporting by Sam Tabariti; editing by William James, Mark Potter, Philippa Fletcher)