Debate on North Sea oil and gas

Oil and gas have been produced from the UK’s North Sea since the late 1960s and early 1970s. Production peaked in 1999 and has since decreased by over 70%. The UK has been a net importer of oil since 2005 (except for 2020) and a net importer of gas since 2004 due to production from the North Sea declining faster than demand.

However, North Sea oil and gas continue to play an important role in the UK’s energy mix, with North Sea gas meeting almost half of the UK’s overall demand for gas in 2024.

Government policy

The government set out its policy for the North Sea in its North Sea Future Plan. The plan says that:

• No new licences for further oil and gas exploration will be issued.
• Transitional Energy Certificates (TECs) will be introduced to help manage existing oil and gas production facilities. These will enable additional production from areas of the North Sea that are adjacent to existing licenced areas.
• As oil and gas production declines, the North Sea oil and gas workforce will be supported to find new jobs in the clean energy industry or other industries.

The government intends to implement these polices through the Energy Independence Bill, which was announced in the King’s Speech 2026.

The government’s decision not to issue new licences has drawn criticism from opposition parties and the oil and gas industry, which say that the UK will continue to need oil and gas until 2050, and that sourcing more of it domestically would be good for energy security, the UK’s economy and jobs, and for the climate.

Taxation

Currently, the effective marginal tax rate on oil and gas production from the North Sea is 78% and comprises a number of different components including the Energy Profits Levy (EPL).

The EPL was initially introduced in 2022 due to the energy crisis caused by Russia’s invasion of Ukraine. It is an additional tax on oil and gas, currently set at 38%, that is intended to address extraordinary profits in the oil and gas sector due to increased oil and gas prices. It is set to be in force until either 31 March 2030 or until oil and gas prices return to “historically normal” levels and the Energy Security Investment Mechanism is triggered.

The government has confirmed that the EPL will be replaced by the Oil and Gas Price Mechanism, which will be a permanent mechanism that will act as a windfall tax if there are future oil and gas price spikes.

Energy security

Domestic production of oil and is generally seen as beneficial to the UK’s energy security, given that the UK relies on oil and gas to meet the majority of its energy demand.

The extent to which increasing North Sea oil and gas production would improve energy security is disputed.

Proponents of more North Sea production, such as Offshore Energy UK (OEUK), say that increasing domestic production would improve energy security because it would reduce the UK’s reliance on imports which are at greater risk of disruption.

However, opponents of more North Sea production say that, because the UK would continue to rely on imports even if North Sea production was increased, the benefits for the UK’s energy security would likely be small. They also say that increased North Sea production would not affect domestic prices of fuels, gas or electricity because the price of oil and gas is heavily influenced by international markets.

Economic benefits and jobs

Data from the Office for National Statistics shows that UK oil and gas extraction accounted for almost £19 billion of gross value added (GVA; the value generated by goods and services) in 2025, 0.7% of the UK’s overall GVA.

However, OEUK says that increasing North Sea oil and gas production could generate an additional £165 billion for the UK’s economy by 2050.

Employment in the oil and gas industry has declined over the last decade, from around 42,000 jobs in 2014 to 28,000 in 2024.

Climate impacts

North Sea oil and gas production produces lower emissions than imports of liquefied natural gas (LNG). However, when combustion of the gas is accounted for, North Sea oil and gas is only around 15% lower in emissions than imported LNG.

Additionally, the government has argued that its decision not to issue more oil and gas licences aligns with the objective to limit global warming to 1.5°C and enables the UK to demonstrate credible climate leadership.