The UK risks prematurely curtailing its oil and gas industry, despite overwhelming sentiment within the sector that the North Sea basin retains significant long-term potential, a recent report by the Aberdeen & Grampian Chamber of Commerce (AGCC) has cautioned. The 43rd Energy Transition Report found that 93% of surveyed businesses believe a future for North Sea operations is viable, provided the appropriate economic conditions are established.
Confidence in the fossil fuel sector is currently undermined by a combination of financial instability, protracted planning processes, transmission charging issues, and slow project consenting, rather than a dearth of opportunity or capability. The report highlights that investment is increasingly migrating overseas due to what businesses perceive as an unfavourable economic and regulatory environment in the UK.
A significant 67% of respondents advocate for planning decisions regarding critical onshore grid infrastructure to be devolved to the Scottish Government, moving away from local authority control. Furthermore, 89% support the granting of new licences and consents where operators can demonstrate lower emissions than imported alternatives and contribute greater economic value to the UK.
The AGCC report points to a “growing transition gap”, leading to infrastructure delays and policy uncertainty. It puts forward several key recommendations, including the approval of the Jackdaw and Rosebank oil fields, the replacement of the existing Energy Profits Levy (EPL) with an oil and gas price mechanism, and expedited planning consent procedures.
The Energy Profits Levy, introduced in May 2022 as a temporary windfall tax, has seen its rate increase from an initial 25% to 38% from November 2024, and its duration extended until March 2030. Its investment allowance (excluding decarbonisation efforts) has also been removed.
The Jackdaw gas field, operated by Shell, and the Rosebank oil field, led by Equinor and Ithaca Energy (now part of Adura), both received final investment decisions in recent years, with production from Jackdaw anticipated from 2025 and Rosebank from 2026-2027. However, in January 2025, a Scottish court ruled the consents for both projects unlawful, citing insufficient consideration of their full lifecycle (Scope 3) emissions. Work on these projects can continue while awaiting a fresh consenting process that addresses these concerns.
Russell Borthwick, Chief Executive of the Aberdeen & Grampian Chamber of Commerce, commented on the findings: “For several years now, the dominant political narrative has increasingly suggested that the future of the North Sea is already decided. This report tells a very different story.”
“The overwhelming majority of businesses operating across the energy sector still believe there is a future for the basin if the UK creates the right fiscal and regulatory conditions to support it.”
Mr Borthwick emphasised that the North Sea remains “one of the UK’s greatest industrial assets” and its workforce crucial for both traditional energy and the transition to offshore wind, carbon capture, and electrification.
Responding to the report, a spokesperson for the Department for Energy Security and Net Zero affirmed:
“Oil and gas production will be with us for decades to come, and we will manage existing fields for the entirety of their lifespan – while actively scaling up clean energy industries in the North Sea.”
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The department further stated that their plans aim to establish the North Sea as a “clean energy powerhouse” and create up to 40,000 new jobs in Scotland by 2030.
A Scottish Government spokesperson reiterated that “Decisions on consenting for offshore oil and gas projects, as well as those on licensing and the associated fiscal regime, are matters that are currently reserved to the UK Government.”
They urged the UK Government to make decisions on North Sea oil and gas projects on a “rigorously evidence-led, case-by-case basis, with climate compatibility and energy security key considerations.”
