INEOS Energy: North Sea decommissioning is destructive and ideological

The decision point

The UK government’s pending decision on the Jackdaw and Rosebank fields is described as pivotal, with almost £11bn of private investment waiting for approval.

Investment and capital flight

The author argues years of policy instability, restrictions on new drilling and the Energy Profits Levy have made the North Sea a poor place to deploy capital, prompting operators to close fields and redirect investment; BP has put its UK North Sea oil and gas business on the market.

Norway is now investing roughly ten times more than the UK in its continental shelf and is exporting some of that gas back to UK shores.

The decommissioning paradox

The North Sea Transition Authority reports almost a quarter of basin spending over the next five years will go to shutting infrastructure down, and from 2029 decommissioning spend will exceed capital investment.

Because companies can offset a significant proportion of decommissioning costs against tax, premature closures bring liabilities forward; the combined impact of decommissioning tax relief and lost tax revenues could approach £13bn by 2035, an outcome the author labels economic self-harm.

Policy and asks

The piece recommends approving Jackdaw and Rosebank as a signal to investors but stresses that a single approval is insufficient, calling instead for a more stable fiscal regime, removal of restrictions on new drilling and reform of the Energy Profits Levy to protect jobs, investment, tax revenues and energy security.