The UK government's imminent decision on whether to approve the Jackdaw and Rosebank fields will mark a pivotal moment in the history and future of the North Sea. Jackdaw, operated by Shell, is a gas development, while Rosebank, led by Equinor (now partnered with Ithaca Energy following Equinor's sale of a stake), is the largest undeveloped oil and gas field in the UK sector. Together they account for nearly £11bn of private investment, and the outcome will signal whether Britain can rebuild its reputation as a serious destination for energy investment.

Approval would send a positive message, but the issue extends far beyond two projects. Years of policy instability under consecutive governments, restrictions on new drilling, and the Energy Profits Levy (EPL)—a windfall tax introduced in 2022 and subsequently increased to 38% (taking the marginal tax rate on North Sea profits to 78%)—have made it extremely difficult to build a business case for investment, causing capital to dry up.

Accelerating the closure of the UK North Sea does nothing to reduce global emissions. Demand for oil and gas persists—the UK still sources roughly half of its gas需求 from the North Sea, with the remainder imported—meaning production and carbon emissions are simply exported, depriving the UK of valuable jobs, investment, and tax revenues. This damages the country's energy security and long-term national wealth, a concern sharpened by the supply shocks Europe experienced after Russia's invasion of Ukraine. In the author's words, this is not managed decline but "ideological destruction of a national resource owned by the country in the name of net zero."

The Decommissioning Paradox

Approving Jackdaw and Rosebank will not, on its own, undo years of damage. Having been told for years that the UK North Sea is not a reliable place to deploy capital, operators have voted with their feet—closing fields and redirecting investment. Last month, BP became the latest in a long line of operators to announce it was shutting up shop, revealing it is marketing its UK North Sea oil and gas business.

Ironically, much of that redirected investment has flowed into the very same basin, but under a different flag. Norway now invests roughly 10 times more than the UK in its own continental shelf and even exports some of that gas back to British shores.

When investment disappears, fields close earlier and decommissioning is brought forward. The North Sea Transition Authority recently revealed that almost a quarter of all spending in the basin over the next five years will go toward shutting infrastructure down rather than building it up. From 2029, decommissioning spending is projected to overtake capital investment.

The accelerating decline of the North Sea carries another significant and often overlooked consequence for the Treasury. Companies can offset a significant proportion of decommissioning costs against tax, so premature closures do not simply switch off future tax receipts—they bring the bill forward. Current estimates suggest the combined impact of decommissioning tax relief and lost tax revenues could approach £13bn by 2035. With public finances already under pressure, accelerating that liability amounts, in the author's view, to economic self-harm.

What Does Stability Look Like?

Oil and gas will remain part of Britain's energy mix for years to come. The question is not whether the country uses these resources, but whether it produces them itself or pays other countries to do so. It is also a question of pace: the government's own Climate Change Committee has advised that UK production should decline in line with demand rather than being shut off abruptly, a framing that frames the current debate as much about the speed and predictability of transition as its direction.

Allowing Jackdaw and Rosebank to proceed would send an important signal about the direction Britain intends to take. However, a green light for both fields alone is not enough. Beyond approval, the author argues for a more stable fiscal regime that gives operators the certainty they need to invest, the removal of government restrictions on new drilling, and reform of the EPL.

The government now faces a choice: responsibly manage a critical natural resource and pillar of UK energy security while protecting jobs and tax revenues, or accelerate its decline—exporting emissions and increasing imports at a time of global instability, while leaving a gaping hole in the Treasury's finances.

By Brian Gilvary, chairman of INEOS Energy, via CityAM

Source: OilPrice.com