By Tsvetana Paraskova
The UK’s budget that left the Energy Profits Levy (EPL) as-is and the wave of merger announcements that followed were the highlights in the UK North Sea oil and gas industry at the end of 2025.
The UK’s government rejected calls to replace the Energy Profits Levy (EPL), commonly known as the windfall tax, in the latest Budget.
The main industry body, Offshore Energies UK (OEUK), condemned the government’s decision, saying that the lack of reform would cost tens of thousands of jobs, cripple investment, and undermine Scotland and the UK’s energy security.
OEUK is also seeking an immediate meeting with the Chancellor to explore every option to reverse this policy and prevent further economic and industrial damage, the association said.
“This is not over. We will keep pressing for change – this industry’s people, their communities and the value of this strategic national asset are too important to dismiss,” commented David Whitehouse, OEUK Chief Executive.
“The Government was warned of the dangers of inaction – they must now own the consequences and reconsider.”
According to Whitehouse, “The future of North Sea energy depends on investment, which won’t come without urgent reform of the windfall tax.”
Projects will either stall or completely vanish if the levy stays in place beyond 2026, OEUK says.
No new exploration wells were drilled in the UK North Sea in 2025 and domestic oil and gas production has fallen by 40 percent in the last five years and is on course to halve again by 2030, per the association, which says that this accelerated decline is being driven by government policy, not geology.
Aberdeen & Grampian Chamber of Commerce commented that the lights are out for North Sea oil and gas with the government’s refusal to replace the windfall tax.
“Limited flexibility on licensing is immaterial if those companies producing the energy we need are taxed at a crippling rate of 78 per cent until 2030. They cannot invest or survive while the EPL remains in place,” the chamber’s chief executive Russell Borthwick said.
“The UK Government has instead opted for a cliff-edge end to North Sea production and to tax the industry to death inside five years,” Borthwick added.
“Jobs will be lost in their thousands as a direct result of this government’s failure to act.”
Concluded Borthwick, “As the voice of business in the North-east of Scotland, we will refocus our efforts on ensuring that this jobs and economy-wrecking tax is brought to an end as soon as possible. Aberdeen is not going down without a fight.”
Apart from the windfall tax, the state of decommissioning in the UK North Sea also featured in reports by the OEUK industry body and the North Sea Transition Authority (NSTA).
OEUK’s 2025 Decommissioning Report highlighted the resilience, innovation, and commitment of the UK offshore energy industry as it navigates the complex challenges of decommissioning while advancing toward net-zero ambitions.
The latest figures showed that in 2024 annual decommissioning expenditure in the UK Continental Shelf (UKCS) topped £2 billion for the first time. Wells remain the largest cost driver, accounting for almost half of forecast expenditure, with projections for nearly 2,000 wells to be decommissioned by 2034. The number of subsea infrastructure removals is also set to jump, with over 95,000 tonnes of subsea infrastructure including concrete stabilisation mattresses and large subsea manifolds plus 883 kilometres of pipelines planned for removal in the next decade.
Decommissioning accounted for 15 percent of total oil and gas expenditure in the UKCS in 2024, with projections indicating this share may exceed 30 percent by the end of the decade.
Moreover, current forecasts suggest that decommissioning costs could surpass capital expenditure in oil and gas as early as 2028 if current investment conditions caused by the EPL, delayed licensing, and market uncertainty persist, OEUK warned.
The North Sea Transition Authority (NSTA) in December named 13 operators who have fallen behind in their decommissioning obligations in the first published table of the North Sea well decommissioning deficit.
The table displays operators who have missed their consent deadlines for fully decommissioning a total of 153 inactive wells, which are spread geographically from West of Shetland to the Southern North Sea and East Irish Sea, with the greatest concentration in the Central North Sea. The table includes 22 operators of which nine licensees, operating a total of 780 wells, are in compliance with their consent deadlines.
“It is our expectation that companies will take immediate action to improve compliance, placing contracts with the supply chain for the wells that are overdue or applying for consents where none exist,” Pauline Innes, NSTA Director of Supply Chain and Decommissioning, said.
The National Energy System Operator (NESO) has warned that normal conditions wouldn’t threaten Britain’s supply, but “when testing against a range of 1-in-20-year peak demand scenarios for 2030/31 to 2035/36, the analysis identifies an emerging risk to GB gas supply security.”
The finding emerged from NESO’s first annual Gas Security of Supply Assessment for winters between 2030 and 2036 under its obligation to assess gas supply security in its new responsibility as Great Britain’s Gas System Planner.
The assessment found that under seasonal normal weather conditions, gas supply would be sufficient to meet demand. However, severe winters and higher demand could put gas supply at risk amid falling domestic production and an increase in imports.
“The UK has the resources to boost North Sea gas production and help meet peaks in energy demand, yet the continued taxing of non-existing windfall profits has become a major deterrent to North Sea investment,” Mike Tholen, director of policy and sustainability at Offshore Energies UK, said in response to NESO’s assessment.
Company news featured several merger announcements as operators embraced deals to shield themselves from the windfall tax.
Shell and Equinor completed the formation of their 50/50 joint venture Adura, which combines their UK offshore oil and gas operations.
Adura assumes Equinor and Shell’s interests in 12 producing oil and gas assets and projects in execution, including: Mariner, Rosebank, Buzzard, Shearwater, Penguins, Gannet, Nelson, Pierce, Jackdaw, Victory, Clair, and Schiehallion. It also holds a number of exploration licenses. The company is headquartered in Aberdeen.
Another major UK operator, TotalEnergies, has signed an agreement with NEO NEXT Energy to merge its upstream business with NEO NEXT and become the leading shareholder in the resulting company, NEO NEXT+, with a 47.5-percent ownership.
The new NEO NEXT+ will be the largest independent oil and gas producer in the UK and will have an asset portfolio including NEO Energy’s and Repsol UK’s interests in the Elgin/Franklin complex and the Penguins, Mariner, Shearwater, and Culzean fields, enriched by TotalEnergies’ UK upstream assets, notably including its interests in the Elgin/Franklin complex and the Alwyn North, Dunbar, and Culzean fields.
NEO NEXT+ will become the largest independent oil and gas producer in the UK with a production of over 250,000 barrels of oil equivalent per day in 2026, TotalEnergies said in early December.
Days later, Harbour Energy announced an agreement to buy substantially all the subsidiaries of Waldorf Energy Partners Ltd and Waldorf Production Ltd, currently in administration, for $170 million. The acquisition is immediately materially accretive to Harbour’s free cash flow and will support the competitiveness, resilience, and longevity of Harbour’s UK business, the company said.
The deal will add oil-weighted production of about 20,000 barrels of oil equivalent per day (boepd) and increase Harbour’s interest in its operated Catcher field to 90 percent, up from 50 percent, and improve the financial stability of the joint venture partnership. Through the Waldorf acquisition, Harbour Energy will also gain access to a new production base in the Northern North Sea with the addition of a 29.5-percent non-operated interest in the Kraken oilfield.
In contract news, Subsea7 announced the award of a contract worth between $50 million and $150 million by Ithaca Energy, for the provision of off-station decommissioning services for the Alba Floating Storage Unit and Greater Stella field FPF-1 production facility, approximately 230 kilometres east of Aberdeen. The decommissioning scope includes the flushing of the subsea pipelines, provision of diver support vessel services, and seabed clearance. Offshore activities are scheduled to commence in the second quarter of 2026.
Ithaca Energy has also awarded TechnipFMC a significant contract for flexible risers on the Captain development in the UK North Sea. TechnipFMC will design, manufacture, and install flexible risers, flowlines, and associated hardware, said the company, for which a “significant” contract is between $75 million and $250 million.
The Captain field has benefited from technology enhancements since first production in 1997, including the second phase of an enhanced oil recovery project supported by TechnipFMC in 2024.
Ocean services provider DeepOcean has said it is nearing completion of a decommissioning contract awarded by TotalEnergies for the disconnection and tow of the Gryphon Alpha FPSO, as well as the removal of associated subsea infrastructure. This marks a first, with proprietary tooling designed and developed in-house enabling the entire scope to be executed fully diverless.
The spool disconnection and blind flange installation represent pioneering achievements in diverless operations, DeepOcean said.