TTF front-month price falls below €50/MWh

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 feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.