BP is preparing to exit or significantly reduce its presence in the UK North Sea after more than 60 years, with a potential sale of its UK offshore operations reportedly in play (possibly to buyers like Ithaca, though talks may have stalled).

The main driver is the UK’s high tax burden on North Sea oil and gas production:

• Effective tax rate ~78% on profits: This combines Ring Fence Corporation Tax (30%), Supplementary Charge (10%), and the Energy Profits Levy (EPL, or “windfall tax”) at 38%.
• The EPL was introduced by the Conservatives in 2022 (initially 25%) amid high energy prices after Russia’s invasion of Ukraine. Labour’s 2024 Budget increased it to 38% and extended it to March 2030.
• There is an “Energy Security Investment Mechanism” that could reduce the rate if prices fall below thresholds for a sustained period, but current geopolitics (e.g., tensions involving Iran) have kept prices elevated.

Critics argue this regime is one of the most punitive for upstream oil/gas in OECD countries, deterring new investment in a mature, declining basin. BP (and others) face high costs for extracting from aging fields while getting to keep relatively little of the upside. BP has been reviewing its portfolio under new CEO Meg O’Neill to cut debt and focus on higher-return opportunities.

BP has been a major operator there for decades, with significant production, hubs like ETAP and Clair, and historical investments. An exit would be symbolic as one of the last oil majors scaling back substantially. Earlier reports (May 2026) mentioned a potential £2 billion divestment. This fits a broader trend of majors shifting capital elsewhere (e.g., more international or lower-carbon projects for some).

Broader implications

Energy security: The UK is already a net importer of energy. Accelerating decline in North Sea output (without sufficient new investment) increases reliance on imports, LNG, and foreign suppliers — especially risky amid global volatility.

Jobs and economy: Thousands of direct and supply-chain jobs in Scotland and elsewhere are at stake. The sector supports high-skilled employment and tax revenue (though the high rate aims to capture more short-term).

Investment climate: Industry groups have warned that uncertainty and high taxes speed up the basin’s natural decline and make new projects unviable. Labour’s policy also includes a ban on new North Sea licensing rounds in some versions, adding to the chill.

Transition trade-offs: Supporters of the tax see it as recouping funds for public spending or green transition while prices are high. Detractors say it undermines domestic production precisely when reliable energy is needed during the shift to renewables (which are intermittent and require backups).

This isn’t isolated—other operators have expressed similar frustrations. Whether BP fully exits, sells assets, or scales back remains to be seen; companies often use such reports as leverage in policy discussions. The story highlights classic tensions in energy policy: short-term revenue vs. long-term production incentives in a geopolitically sensitive sector.

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BP considers quitting North Sea after Labour tax raid

Company’s potential exit would mark biggest casualty of Rachel Reeves’s oil and gas levies

BP is preparing to quit the North Sea after more than 60 years as Labour ramps up taxes on oil and gas.

The £80bn energy giant had been close to selling its UK offshore operations to rival Ithaca in recent weeks, according to the Financial Times. The Telegraph has the story.

It is said to still be actively considering other deals.

An exit from the North Sea by BP would mark the biggest casualty of Labour’s oil and gas tax policy.

It comes as energy giants grapple with the North Sea windfall levy, which has pushed industry taxes on oil and gas profits to 78pc.

Rachel Reeves launched a fresh tax raid last month on the sector, including BP and Shell, to fund £1.8bn of cost of living support.

Ms Reeves scrapped a tax rule allowing oil and gas companies to offset profits made in Britain against losses made by foreign subsidiaries.

It is expected to raise hundreds of millions of pounds a year for the Treasury and pay for support for families and businesses.

The Chancellor’s move was cheered by Left-wing campaigners, with Greenpeace saying it was “exactly the kind of action we’ve been calling for”.

However, it has raised concerns that the changes could damage the UK’s already heavily taxed oil and gas industry and push more jobs abroad.

Offshore Energies UK, a trade association, said last year that the North Sea industry is already losing around 1,000 jobs a month as companies made cuts to their workforce.

BP has been critical of the windfall taxes imposed on UK offshore operators by the Government.

Meg O’Neill, the energy giant’s chief executive, ordered a review last month of the company’s offshore operations.

BP is currently one of the largest operators in the North Sea. The FTSE 100 business holds interests in 20 to 25 producing fields in the UK, centred on several major hubs.

However, energy firms have been reviewing their positions in the North Sea after Labour’s tax raids. Bosses have also raised concerns about Ed Miliband’s approach to their oil and gas operations.

It comes after the Mr Miliband described BP’s profits as “morally and economically wrong” earlier this year.

Read the full story here.