The United Kingdom still holds significant oil and gas reserves in the North Sea, capable of meeting half of the country’s energy needs over the coming decades, according to a recent analysis by Offshore Energies UK (OEUK). However, current production levels have reached historical lows, forcing Britain to import around 50% of its fossil energy, even as domestic demand remains high. The industry body, representing key players in the UK’s energy sector, blames a fiscal policy perceived as overly restrictive and poorly adapted to current market realities. The tax burden introduced in response to the 2022 global energy crisis continues to discourage investments in new exploration and drilling projects.
An under-exploited potential
According to OEUK, the current fiscal environment could restrict British production to around 4 billion barrels of oil equivalent (boe) by 2050, whereas expected demand over the same period ranges between 13 and 15 billion boe. To reach this untapped potential, OEUK urgently recommends revising tax policies, particularly by reducing the windfall tax implemented when oil and gas prices surged in 2022. This tax, originally designed to capture extraordinary profits resulting from Russia’s invasion of Ukraine, is now viewed as a major economic barrier for companies operating in the North Sea. Industry representatives argue that such high tax rates currently discourage all forms of investment in the region, threatening the long-term viability of the British energy sector.
Strategic and economic stakes
Moreover, OEUK emphasizes that domestic oil and gas production generates fewer emissions compared to importing alternatives such as liquefied natural gas (LNG), primarily sourced from the United States. This significant difference in carbon footprint is frequently cited as justification for maintaining or expanding the exploitation of national resources. The British government has recently shown openness toward new projects around existing infrastructures, such as Rosebank and Jackdaw, implicitly underscoring the need to preserve a certain level of energy sovereignty. Nevertheless, these new initiatives urgently require fiscal adjustments to become economically sustainable over the long term.
A complex political choice
Faced with this scenario, the British government must reconcile conflicting strategic and economic imperatives. On one hand, there is a clear political willingness to reduce external energy dependence by exploiting more available domestic resources. On the other hand, the current fiscal constraints make investment projects costly and risky for international oil and gas companies operating on UK territory. Economic actors in the sector continue to exert pressure on the government to secure more favorable fiscal measures capable of sustainably reviving activity in the North Sea. The United Kingdom thus finds itself at a critical crossroads, facing the urgent need to clarify its energy fiscal policy, a decision whose economic repercussions could be significant for decades to come.
