BP deals hammer blow to hopes of a North Sea revival
Oil giant’s decision to quit UK waters suggests time is running out for Burnham to reverse decline
JONATHAN LEAKE
BP’s decision to quit the North Sea – driven by a disastrous mix of energy and tax policies, plus its natural decline – is a watershed moment for the British energy industry.
The company has been in the North Sea from the start, gaining one of the first exploration licences in 1964 and finding the West Sole gas field off East Anglia – one of the UK’s first discoveries – a year later.
In 1970, it made one of the most significant discoveries in offshore history: the mighty Forties field.
Alongside other discoveries, that field unleashed a massive flow of crude that fuelled a true oil bonanza, turning Britain into a net exporter of oil by the early 1980s.
Yet soon, BP will have no operations in British waters for the first time in more than 60 years.
If Burnham is hoping to attract new investment in the North Sea, there can be no worse advertisement than the pioneer of the British oil industry quitting.
Meg O’Neill, BP’s relatively new chief executive, said the decision was motivated by a desire to “direct capital to our highest-value opportunities”.
To some observers, this is evidence that repeated tax raids on the North Sea have left it almost un-investable.
Russell Borthwick, the chief executive of the Aberdeen and Grampian Chamber of Commerce, said: “This decision is another stark reminder that confidence in the UK continental shelf has been badly shaken after years of policy uncertainty, punitive taxation and mixed messages about the future of the industry.”
A windfall tax was first imposed by the Conservatives in 2022 when energy prices surged, creating a short-term windfall for energy companies. The levy began at 75pc but was increased to 78pc by the new Labour Government in 2024.
For BP, the impact was immediate. Its tax reports say that the decision cost it an extra £539m, with the company facing an overall UK corporate tax rate of 52pc – more than double the standard UK corporate rate of 25pc and far higher than what it pays in most other countries.
BP’s tax reports warn that the UK’s energy profits levy (or windfall tax) had “created significant uncertainty for the UK’s oil and gas industry”.
At the same time, Ed Miliband, the former energy secretary, imposed a ban on new oil and gas exploration as part of Labour’s net zero policies.
The combination of punitive tax raids and a clear signal from the Government that oil and gas did not have a long-term future in Britain has driven companies out of the North Sea.
Shell, Britain’s other major oil company, has already engineered a partial exit. It moved all its UK offshore assets into Adura, a 50-50 joint venture with Equinor. Other oil giants such as Chevron and ConocoPhillips have sold assets to smaller independents.
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