BP has announced it is putting its entire North Sea operation up for sale, a move that could bring an end to sixty years of British production in the basin, as the energy giant buckles under the weight of Labour’s punishing windfall tax.
The FTSE 100 firm, which operates five rigs in UK waters, confirmed the decision as part of a wider cost cutting drive, with executives citing the crushing tax burden imposed on North Sea operators since the war in Ukraine began.
Chief executive Meg O’Neill insisted the North Sea remained “integral” to Britain’s energy system, but said BP’s assets there would be better placed under a different owner as the company narrows its focus to its highest value projects elsewhere.
A Tax Regime of Labour’s Making
The energy profits levy was originally introduced in 2022 at 25 per cent. But Labour, since taking office, hiked the rate up to 38 per cent and extended it all the way out to 2030. Combined with existing levies, North Sea operators now face an eye watering effective tax rate of 78 per cent, a level that critics say has made investment in British oil and gas all but unviable.
The Conservative Shadow Secretary of State for Business and Trade, Andrew Griffith MP said: “This is a deadly serious ‘wake up call’. Britain needs to compete – for energy, capital and talent – but the government carries on regulating, putting up taxes and deterring investment. Labour simply don’t understand business.”
Richard Tice, Reform UK’s energy spokesman, reserved particular scorn for Labour’s approach, warning that BP’s retreat from the North Sea could be a precursor to the company shifting its headquarters overseas altogether, taking billions in tax revenue with it. He described net zero as the greatest policy blunder of the century.
Energy analyst Kathryn Porter went further still, suggesting that once BP exits the North Sea it will have little reason to remain listed in London at all, and that a full departure from the UK, and the Treasury’s coffers, would not be surprising.
A Possible Drilling U-turn From Burnham Comes Too Late
The announcement lands just a day after Andy Burnham signalled he may finally reopen the North Sea to fresh drilling, admitting that Britain “cannot ignore” its own oil and gas reserves. Sir Keir Starmer had faced sustained criticism, including from Donald Trump, for refusing to unlock the basin’s potential.
Much of the damage, however, was done under Ed Miliband, who as energy secretary delayed final approval for the Rosebank and Jackdaw fields despite both already holding licences, arguing the move would not lower household bills. His successor, Miatta Fahnbulleh, is now expected to wave the projects through, though for BP the reversal may have come too late.
Andrew Bowie, the Tory shadow energy minister, said Mr Burnham should abandon Labour’s failed approach entirely, immediately approve the Jackdaw and Rosebank developments, and scrap plans to ban new North Sea licences altogether.
Thousands of Jobs on the Line
BP employs around 1,100 people directly in its North Sea business and 14,000 across the UK as a whole. The company has said it intends to keep its global headquarters in Britain even if the North Sea arm is sold, though few in the industry are taking that assurance for granted given the wider exodus of investment the tax regime has triggered.
The news comes only a day after BP revealed plans to cut 700 jobs amid warnings of an oversupplied oil and gas market, part of a broader shake up under Ms O’Neill, who took charge in April promising to restore stability to a company that has endured years of boardroom turmoil.
BP had come close earlier this year to offloading the North Sea business to Ithaca Energy in a deal thought to be worth around £2 billion, but those talks collapsed before completion.
Ms O’Neill maintained that the UK “has been our home for more than 100 years” and would remain important to BP’s future, praising the North Sea workforce’s skill and the assets’ resilience as reasons a new owner could unlock further value. Whether that new owner will be found under a tax regime critics say has driven a once proud British industry to the brink remains to be seen.
