News
15/12/25
Viewpoint: UK offshore faces deeper consolidation
Viewpoint: UK offshore faces deeper consolidation
London, 15 December (Argus) — UK offshore oil and gas operators are bracing for
more consolidation next year after the government confirmed the Energy Profits
Levy (EPL) will remain in place until March 2030. The EPL, introduced in 2022,
raised the headline tax rate on upstream profits to 78pc from 40pc, reshaping
project economics and company strategies. Executives argue the current price
environment is "far from windfall" and describe the fiscal regime as punitive.
Faced with higher taxes and tighter margins, operators are seeking scale and
cost savings through mergers and joint ventures. Shell and Norway's
state-controlled Equinor formally launched their new UK offshore joint venture,
Adura, earlier this month after agreeing the deal in 2024. Also this month,
TotalEnergies agreed to form a UK-focused joint venture with Neo Next , an
independent owned by Spain's Repsol and Norwegian private equity firm
HitecVision. The new business, Neo Next+, will hold more than 50pc of the
Elgin-Franklin gas complex, where TotalEnergies is already operator, and
interests in several other fields. The deal will leave BP as the only European
major still directly operating a UK portfolio itself. Other examples of
operators restructuring to manage UK exposure include Italian firm Eni
exchanging its UK upstream assets for a stake in North Sea producer Ithaca
Energy , and UK independent Harbour Energy merging with Germany's Wintershall
Dea in an $11.2bn transaction that added assets offshore Norway and in other
regions. Both those deals closed in 2024. Although Harbour has since cut
hundreds of North Sea offshore jobs, it is not giving up on the UK. It agreed a
deal this month to increase its interest in the UK's Catcher field to 90pc, from
50pc, via a takeover of junior independent Waldorf Production. The deal, which
will also give Harbour a stake in the Kraken field, will add 20,000 b/d of oil
equivalent (boe/d) to the firm's UK production. Harbour is the UK's largest
independent producer for now, with output of 156,000 b/d of oil equivalent
(boe/d) from the UK continental shelf in January-September this year. But
analysts who track the sector estimate Adura will eventually produce more than
200,000 boe/d. And TotalEnergies expects Neo Next+ to reach 250,000 boe/d in
2026. While operators consolidate to help manage fiscal pressure, the outlook
for fresh projects is limited by government policy. Greenfield oil and gas
developments in the UK will be scarce in the 2026 and beyond. The government's
ban on new licences remains in force. Its North Sea Future Plan, released on
budget day, allows limited additional production near existing producing fields.
Operators are expected to direct capital spending to near-field tiebacks and
other work to lift output from existing developments. Two greenfield projects
that could see first oil or gas towards late 2026 are Rosebank and Jackdaw.
Equinor and Ithaca continue to work on Rosebank. Shell continues to work on
Jackdaw. But the government must still decide whether the resubmitted
environmental plans meet the required standard. As for Ithaca Energy's Cambo
development, west of Shetlands, which has yet to reach a final investment
decision , analysts are increasingly sceptical that it will proceed at all.
After the budget, investment bank Stifel issued a "sell" note on Ithaca's
shares. Its valuation now assumes Ithaca's 100pc-owned Cambo project will not go
ahead. By Jon Mainwaring Send comments and request more information at
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