Despite its decline from peak production, the North Sea oil and gas industry remains a significant part of the UK economy, supporting hundreds of thousands of jobs and generating billions in tax revenue. However, it faces mounting pressures from falling output, rising costs, high taxation and the energy transition.
In 2024, UK Continental Shelf production stood at 1.09 million barrels of oil equivalent per day. Crude oil and condensate production specifically was approximately 630,000 barrels per day. According to NSTA projections, crude oil and condensate production is on track to decline to around 420,000 barrels per day by 2030.
Overall North Sea production fell by 8% in 2024/25. Oil prices broadly trended downward across the financial year, falling from around $90/barrel in April 2024 to approximately $65/barrel by March 2025, before recovering to around $73–78/barrel by mid-2026 amid Iran-related tensions in the Middle East.
The North Sea oil and gas industry supports approximately 200,000 jobs across the UK, including around 30,000 people working directly on offshore platforms. The average salary for an offshore oil worker in the UK is approximately £65,000 per year. Aberdeen remains the industry’s primary hub, and the decline of the sector has significant implications for Scotland’s north-east economy.
Many workers are now moving into adjacent sectors such as offshore wind, carbon capture and storage, and decommissioning, though the pace of transition has drawn criticism from trade unions and industry groups who argue that new energy jobs are not materialising fast enough to replace those being lost.
Companies operating in the North Sea currently face a combined headline tax rate of 78% on their profits. This comprises three layers: Ring Fence Corporation Tax at 30%, the Supplementary Charge at 10%, and the Energy Profits Levy (EPL) at 38%.
The EPL was first introduced in May 2022 by then-Chancellor Rishi Sunak at a rate of 25%, in response to soaring energy company profits following Russia’s invasion of Ukraine. It has since been increased twice: to 35% from January 2023, and to 38% from November 2024 under the Labour government, which also extended its duration to March 2030.
| Year | Total Tax Revenue | Notes |
|---|---|---|
| 2020/21 | £0.3bn | COVID-19 pandemic |
| 2021/22 | £1.4bn | Post-pandemic recovery |
| 2022/23 | £9.0bn | Ukraine crisis; EPL introduced |
| 2023/24 | £6.1bn | Prices easing |
| 2024/25 | £4.5bn | EPL raised to 38% |
| 2025/26 (forecast) | £2.7bn | OBR forecast |
| 2030/31 (forecast) | £0.1bn | EPL expires; production low |
As fields reach the end of their productive lives, the UK faces a massive decommissioning programme. The NSTA estimates total industry costs for decommissioning all remaining UK upstream oil and gas infrastructure at £44 billion (in 2024 constant prices). Of this, £27 billion is expected to be committed between 2023 and 2032.
A record £2.4 billion was spent on decommissioning in 2024. Some 1,500 wells are due for plugging and abandonment between 2026 and 2030, with a backlog of over 500 wells already having missed their original deadlines. The NSTA has warned that the total cost to the Exchequer from decommissioning-related tax repayments and foregone revenue is estimated at £11.7 billion in present value terms.
Industry Warning: Offshore Energies UK estimates that by 2028, annual spending on decommissioning (projected at £3 billion) will exceed spending on new oil and gas investment (£2.6 billion) for the first time. OEUK has described 2028 as a “critical inflexion point” for the industry.
Contrary to popular belief, the UK exports much of the primary oil it produces from the UKCS because UK refineries are designed to process oil with a lower sulphur content than most North Sea crude. In 2024, only 7.7% of the oil used in UK refineries came from the UKCS. The UK imports significant quantities of oil from Norway, the US and other producers to meet domestic refining needs.
This is a crucial point in the political debate: even if the UK produced more North Sea oil, it would largely be sold on international markets at world prices rather than being consumed domestically at a discount. Oil prices are set globally, not locally.