Wooden Mackenzie Sees Sharp Pullback in UK North Sea Capex

Not too long ago, U.S. President Donald Trump claimed that the UK has 500 years of oil reserves left within the North Sea, and blamed the nation’s excessive vitality costs on the federal government’s unwillingness to drill. Nonetheless, the unlucky reality is that the North Sea oil and fuel sector has been in a big and extended decline because of the basin’s getting old oil fields, with manufacturing falling sharply since its peak within the early 2000s. In accordance with the North Sea Transition Authority (NSTA), the UK’s vitality regulator, the North Sea had ~2.9 billion barrels of oil equal on the finish of 2024, suggesting solely a long time of provide, not a whole lot of years as Trump claims.

Certainly, WoodMac has predicted that the present 12 months may very well be the final time the UK will produce over 1 million boe/d from the North Sea.

The North Sea decline has led to diminished funding, job losses, and elevated UK reliance on imports, regardless of ongoing efforts to handle the vitality transition. In the meantime, excessive taxes and coverage uncertainty, significantly the Vitality Earnings Levy, have been deterring new tasks, accelerating consolidation, and shifting focus in direction of offshore wind. The UK Vitality Earnings Levy (EPL) is a short lived “windfall tax” with a headline fee of 78% on distinctive earnings on UK oil and fuel producers that was launched in 2022 through the world vitality disaster. EPL is about to finish by March 2030, however might be changed by a everlasting, revenue-based Oil and Fuel Worth Mechanism (OGPM) from 2030, making use of a 35% cost when costs are excessive, utilizing thresholds like $90/barrel oil and 90p/therm fuel. The EPL has been some extent of competition for the business as a consequence of its damaging influence on funding.

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In accordance with a new report by Wooden Mackenzie, the North Sea upstream oil and fuel sector in 2026 might be formed by falling funding (significantly within the UK), continued M&A exercise, regional divergence in Norway and the UK, ongoing vitality transition pressures, and a robust concentrate on capital self-discipline in addition to improved operational effectivity.

Listed below are 5 key North Sea upstream themes to look out for in 2026:

#1. Diverging Funding and Exercise Ranges

Funding within the North Sea upstream sector is projected to fall total in 2026, pushed by a big decline in UK funding to lower than $3.5 billion, its lowest actual phrases stage for the reason that Seventies. In distinction, Norway will keep momentum with sustained growth spending of round $20 billion, specializing in bringing main tasks on-line rapidly to keep up manufacturing plateaus and guarantee European fuel provide safety. The UK’s decline is linked to a tricky fiscal and regulatory atmosphere, whereas Norway will profit from extra secure insurance policies and a sturdy venture pipeline.

Nonetheless, Woodmac has predicted that North Sea manufacturing will stay regular at ~5.3 million boe/d regardless of the spending pullback, due to new start-ups in each Norway and the UK. Norway’s manufacturing will plateau at round 4.1 million boe/d with Equinor‘s (NYSE:EQNR) Johan Castberg and Var Energi’s Balder re-development accounting for over 50% of this new quantity, whereas new tasks will contribute one other 500 000 boe/d. Norway is projected to carry six new start-ups on-line within the present 12 months, with Equinor’s 136 million boe Irpa fuel subject being a key spotlight.

#2. Continued Mergers and Acquisitions (M&A) and Company Restructuring

Uncertainty available in the market will drive additional M&A alternatives, particularly within the UK, the place consolidation of weaker gamers will proceed. The UK panorama is predicted to consolidate as corporations with sturdy steadiness sheets purchase non-core property, leveraging tax losses and decommissioning aid. Norway, in the meantime, is predicted to see extra restricted, smaller asset offers. New enterprise fashions and strategic joint ventures (such because the NEO NEXT+ collaboration) are additionally rising as options to capital constraints and a approach to handle threat and basin publicity.

#3. Intensified Deal with Capital Self-discipline and Effectivity

Amid expectations of decrease oil costs (Brent is forecast to common round $57-$59/bbl) and an oversupplied market, North Sea corporations will prioritize capital self-discipline amid monetary constraints. Operators will focus funding on high-return, quick-return tasks reminiscent of brownfield expansions and near-field tie-backs to present infrastructure. This concentrate on effectivity is essential for profitability in a difficult value atmosphere.

#4. Vitality Transition and Decarbonization Pressures

The business stays below intense scrutiny to handle local weather issues. Key themes embrace the mainstreaming of Carbon Seize, Utilisation, and Storage (CCUS) tasks and the potential for brand new insurance policies concerning Scope 3 emissions reporting in Norway following authorized challenges. The electrification of offshore operations and integrating renewable vitality sources are additionally gaining traction as corporations search to scale back their carbon footprint and meet environmental, social, and governance (ESG) metrics.

#5. Focused Exploration, Primarily in Norway

In accordance with WoodMac, exploration exercise within the North Sea might be virtually solely a Norwegian endeavor in 2026, with operators planning to drill over 30 exploration wells. This contrasts sharply with the UK Continental Shelf, which noticed no exploration wells drilled in 2025. Norwegian exploration is concentrated on high-impact prospects with clear paths to growth, and appraisal wells on present discoveries reminiscent of Afrodite, Carmen and Norma, which might unlock vital fuel provides for Europe.

By Alex Kimani for Oilprice.com

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