UK Budget Signals Wave of New North Sea Oil and Gas Drilling

The Budget’s forecasts assume substantial new North Sea production. The Office for Budget Responsibility, or OBR, expects tax receipts from developing new fields. Its calculation includes Rosebank and other future discoveries, not just fields already producing. This matters because the forecast depends on government approvals that have not all happened yet.

The OBR used NSTA estimates covering prospective resources in current licences. Those resources amount to roughly 1.2 billion barrels of oil and gas equivalent. The watchdog expects production to decline by about 10 per cent annually from 2027 to 2031 if new fields are developed.

The assumption does not formally breach the manifesto promise to ban new North Sea drilling licences. However, it signals a softer approach to fields under existing licences. Jackdaw has been approved, while Rosebank remains undecided. Other discoveries would face government and regulator approval processes.

The term describes oil and gas that may still be available beneath the North Sea in areas already covered by existing licences. The NSTA uses it for prospective resources, meaning its best estimate of untapped reserves that could potentially be developed. The article does not present these resources as guaranteed production.

The OBR relied on this NSTA estimate when calculating future North Sea output and tax receipts. In effect, the watchdog treated these possible resources as a basis for assuming further field development. That assumption links geological potential to the government’s financial forecasts.

The resources still need projects, approvals and production decisions before they generate energy or taxes. Companies would have to pass hurdles similar to those faced by Adura, the owner of Rosebank and Jackdaw. Government and regulators would then decide whether particular developments can proceed.

The NSTA’s latest estimate puts prospective North Sea resources at roughly 1.2 billion barrels of oil and gas equivalent. This is the article’s measure of potential resources within current licences. It represents an estimate of what could be developed, rather than a confirmed production total.

The OBR used that estimate in its Budget calculations. It assumed new fields would be developed and would contribute to future production and tax receipts. The figure therefore matters beyond geology: it forms part of the financial case behind the government’s expected North Sea output.

Actual extraction would depend on approvals and company decisions. Energy companies would need to navigate government and regulator hurdles for new discoveries. Jackdaw has been approved, but Rosebank and other potential fields still face decisions. The article does not say how much of the 1.2 billion barrels will ultimately be produced.

The manifesto promise concerns issuing new drilling licences. It does not, according to the article, prevent development in areas that already hold licences. The government can therefore consider fields and discoveries within those existing licences while maintaining the stated ban on new licences.

This distinction is central to the Budget assumption. The NSTA estimates roughly 1.2 billion barrels of prospective resources under current licences. If projects in those areas win approval, production can expand without the government awarding a new licence for each field. Jackdaw is the clearest current example, while Rosebank is still awaiting a decision.

Approvals are not automatic. Energy companies would face hurdles involving the government and regulators, similar to those faced by Adura. The approach would represent a softening of the government’s stance on existing North Sea reserves, even if ministers say it does not breach the manifesto commitment.

Each actor has a different role. The NSTA estimates how much untapped oil and gas may exist in current licences. The OBR uses production assumptions to forecast tax receipts and public finances. Energy companies identify discoveries, propose projects and seek permission to develop them.

The government and regulators then assess whether a project can proceed. The article says companies would face hurdles similar to those navigated by Adura, the owner of Rosebank and Jackdaw. Energy secretary Miatta Fahnbulleh approved Jackdaw after a lengthy consultation. A decision on Rosebank remains pending.

The OBR does not approve fields. It assumes development when preparing the Budget forecast, including production from prospective resources. The NSTA does not set the Budget either; it supplies estimates. Companies must pursue projects, while ministers and regulators decide whether those projects receive the necessary approvals.

The OBR built future tax forecasts around new North Sea production. If approvals and development fall short of its assumptions, expected oil and gas tax receipts may not arrive. The article warns that this could leave the government facing a multibillion-pound hole in the public finances.

The mechanism is a faster production decline. With new fields, the OBR expects output to fall by roughly 10 per cent annually between 2027 and 2031. Without production from licensed new fields, it warned that the yearly decline could reach 14 per cent. Lower production would reduce the taxable activity included in the forecast.

This is a risk to the Budget’s assumptions, not a confirmed deficit. Rosebank has been included in government forecasts since at least 2019, but it has not yet been approved. Jackdaw was approved last week, while other future discoveries remain subject to hurdles.

In general, an offshore field turns an underground resource into energy by drilling wells, bringing oil or gas to the surface, and sending the production for sale. Companies receive income from that production, while governments can collect taxes linked to the industry. The article focuses on the resulting North Sea production and tax receipts, rather than explaining the engineering in detail.

The article’s forecast shows the financial link clearly. The OBR expects new-field development to support oil and gas output and tax receipts. It forecasts production declining by roughly 10 per cent annually from 2027 to 2031 with new fields. Without licensed new-field production, the decline could reach 14 per cent.

Production declines because a field’s accessible, recoverable resources diminish over time, so output eventually falls. That general explanation is established energy knowledge; the article itself only gives the production forecasts. New discoveries can slow the overall decline, but approvals remain necessary.