Oil and gas in the UK: industry profile

The UK oil and gas industry remains large and economically significant, sustaining 154,000 jobs nationwide and contributing an estimated £25bn in gross value added each year, according to Offshore Energies UK (OEUK). However, it faces a complex and ever-shifting outlook.

Being highly exposed to shifts in global demand and commodity price swings, the sector is inherently cyclical and prone to volatility. Demand collapsed during the COVID-19 pandemic, forcing North Sea operators to cut output and even close fields early. By contrast, the post-pandemic rebound and the sharp rise in energy prices following Russia’s invasion of Ukraine significantly boosted industry revenue and profits in 2022; in the first half of that year, UK gas output rose by 26%. More recently, as IBISWorld note, performance has weakened in the face of softening global markets, surging US output, and falling Brent prices.

Beneath these cyclical fluctuations lie more enduring structural challenges. Combined oil and gas production from the UK Continental Shelf (UKCS) peaked in 1999 and has since trended strongly downwards (fleeting periods of output growth notwithstanding). Output in 2024 dropped to the lowest levels since the 1970s. Whilst oil production rose by 3.8% in the first quarter of 2025 (according to government data), production remains well below pre-pandemic levels. Gas production, meanwhile, fell by 6.7% during the same period.

Midstream operators have felt the impact of declining upstream production: flows through major pipelines such as the Forties system have dwindled, whilst terminals like Sullom Voe now operate at a fraction of their capacity. The downstream segment has also struggled in recent times, with some refineries facing closures and downsizing in the face of poor margins.

Perhaps unsurprisingly, BDO note that the total number of enterprises in the extractive oil and gas industry dropped during the period 2019-2023. Small enterprises with a turnover of less than £499k experienced the harshest decline, seeing a fall of 36.8%.

That said, oil and gas continue to account for nearly three-quarters of UK energy use, underscoring the industry’s continuing importance even as the transition to alternative sources accelerates.

The UK’s oil and gas industry is split into three main segments: upstream, midstream, and downstream. A brief overview of each of these is set out below.

It should be noted that some large companies participate in all three segments, whilst other firms specialise in one or two areas (for example, pure exploration companies upstream, or independent refiners downstream).

This profile focuses primarily on the upstream segment (this being the core of the industry), but also touches on midstream and downstream aspects.

This segment is concerned with searching for oil and gas deposits, drilling wells, and extracting hydrocarbons. Offshore operations in the North Sea account for the vast majority of activity, with the remainder coming from a few onshore fields (such as Wytch Farm in Dorset).

According to the North Sea Transition Authority (NSTA), the respective contributions of oil and gas to total production during 2023 were approximately 56% for oil and 44% for gas.

As the North Sea basin has matured, its makeup has shifted from a few huge fields decades ago to many smaller, technically complex fields today.

Detailed statistics on offshore oil and gas production, including data on particular fields, can be accessed via the NSTA’s data platform.

The midstream segment connects production to refiners and distributors. It includes pipeline networks, processing terminals, storage facilities, and export/import infrastructure.

Given that most production is offshore, the UK has extensive subsea pipeline systems to bring hydrocarbons ashore. For example, the Forties Pipeline System, owned by INEOS, transports oil from North Sea platforms. Similar pipeline networks and receiving terminals exist for gas (notably at St Fergus in Scotland and Bacton in England, where offshore gas is processed and enters the national gas transmission system).

Meanwhile, liquefied natural gas (LNG) is imported via terminals such as South Hook and the Isle of Grain, whilst pipelines bring in gas from Norway, Belgium and the Netherlands. Alongside these, there are oil storage terminals and tanker loading ports, like Hound Point.

Much of the UK’s midstream infrastructure was built decades ago alongside major field developments and is now aging. Thus, as is explored in greater detail below, efficient management and/or decommissioning of this infrastructure (including potentially repurposing it for CO₂ or hydrogen transport in future) is an emerging issue.

This segment deals with the refining of crude oil into petroleum products, with the purification of raw natural gas, and with the distribution of consumable products to customers. Notably, according to UK EITI, most UK refinery supply comes from imports.

In terms of outputs, the downstream segment delivers the final consumable products: petrol, diesel, aviation fuel, marine fuel, kerosene, chemical feedstocks, and so on.

Currently, there are four major oil refineries operating in the UK, including the Fawley refinery (ExxonMobil) and the Pembroke refinery (Valero Energy).

Distribution of refined products is handled via pipelines, road tankers, rail, and coastal shipping to supply depots and retail petrol stations.

Climate change and the drive to reach net-zero greenhouse gas emissions is reshaping the UK oil and gas industry. With legally binding government targets and growing investor and public expectation, companies are under pressure to decarbonise.

The North Sea Transition Deal, for example, commits the upstream sector to halving its production emissions and eliminating routine flaring by 2030. Operators are responding with measures which aim to reduce emissions from ongoing oil and gas operations, such as electrifying platforms and tightening methane detection.

In addition, several large players are diversifying, repositioning themselves as broader energy companies. BP, Shell, and others have invested heavily in renewables such as offshore wind. Downstream, meanwhile, Essar has plans to produce sustainable aviation fuel (SAF) at Stanlow.

Hydrogen is another growth area, as exemplified by “blue” hydrogen projects such as BP's H2Teesside. “Green” hydrogen may also offer opportunities going forward, given its alignment with expanding offshore wind portfolios. Here, there are opportunities for existing gas infrastructure to be repurposed.

Alongside this, the industry is spearheading carbon capture and storage (CCS) projects, turning depleted reservoirs into CO₂ storage hubs. Initiatives such as the Northern Endurance Partnership (in which BP is a shareholder) and Harbour Energy’s Viking CCS project exemplify efforts to repurpose infrastructure and retain skilled jobs.

Diversification is not universal across the sector, however. Analysis by Uplift shows that only seven out of 87 offshore oil and gas companies will invest anything in renewable energy by 2030. Smaller producers often lack the resources to pursue new energy ventures and may choose to simply run down existing oil and gas assets instead.

Lately, the industry has faced a difficult and uncertain fiscal and regulatory landscape.

Perhaps most notably, the Energy Profits Levy (EPL) – first introduced in 2022 as a windfall tax – has raised the headline tax rate on upstream earnings from 40% to 78%. In 2023 Harbour Energy, the UK’s largest independent producer, explicitly linked job cuts and a pivot overseas to the EPL. Whilst the government has recently consulted on the replacement of the levy with a new permanent price mechanism in 2030, industry bodies such as OEUK have lobbied for its removal or moderation sooner, to improve the competitiveness of the sector.

Licensing and permitting have also become increasingly thorny and unpredictable, particularly in light of the drive towards Net Zero discussed above. For example, as of September 2025 several oil and gas drilling licences awarded in 2022 hang in the balance following a judicial review challenge by the campaign group Oceana, who argue that that the associated risk assessments did not fully consider the potential climate and environmental impact on marine protected areas. Meanwhile, the incumbent Labour government has pledged to issue no more new North Sea oil and gas exploration licences, and the North Sea Transition Authority (NSTA) has paused consideration of granting any further licences from the 33rd Licensing Round pending the outcome of the government’s consultation on the future of licensing.

In addition, the industry continues to face tight environmental controls, for instance around flaring and venting.

According to a recent BDO report, the current fiscal and regulatory regime – particularly the EPL – has led some North Sea producers to opt for consolidation and geographical diversification, with other jurisdictions being seen as offering a more favourable business environment.

Having once been a net exporter of oil and gas, the UK is now a net importer of both. Government data show, for example, that net imports of primary oils increased by 12% in 2024, to reach 20 million tonnes. During the same year, net imports of natural gas increased by 4.9%, in light of declining domestic production.

In addition, the UK’s oil refineries currently do not produce enough transport fuel to meet domestic demand in full. Whilst UK refineries produced a fifth more petrol than needed to meet demand in 2023, they met only around half of UK diesel demand and less than a third of jet fuel demand, with imports filling the gap.

In this context, energy security has emerged as a central theme for the UK’s oil and gas industry, particularly in light of the Russia-Ukraine war and its impact. Some commentators – such as Professor John Underhill at the University of Aberdeen – have recently argued that dependence on imports exposes the country to excessive geopolitical and economic risk, and called on the government to adopt a policy approach which balances energy security with environmental sustainability and climate concerns.

Whilst it remains to be seen how the government will respond to such calls, opportunities may arise should they choose to stimulate domestic production by permitting near-field exploration, for example.

As the North Sea basin has matured, decommissioning has become a defining feature of the UK oil and gas industry. Dozens of fields are expected to cease production this decade, with an estimated 1,500+ wells being required to be plugged and abandoned by 2030, according to the NSTA.

Accordingly, decommissioning expenditure is rising sharply. In 2024, operators spent a record £2.4 billion on decommissioning, with total spending projected at £27 billion between 2023 and 2032 (source: NSTA). BDO report that decommissioning expenditures are expected to exceed capital expenditures by 2029, marking a structural shift in priorities.

Costs in this area are often difficult to control, with projects frequently overrunning initial budgets. The NSTA has urged operators to improve planning, adopt collaborative contracting models, and engage the UK’s specialist supply chain early to capture efficiencies. Tax relief arrangements mean the government shoulders a significant portion of the bill, creating a shared interest in cost reduction.

That said, decommissioning may be viewed as an opportunity. For example, UK operators stand to develop world-class expertise in this area, which can be exported as other regions face similar end-of-life challenges.

Many of the remaining North Sea oil and gas fields are relatively small, and technically complex to extract from. As a result, operators are employing innovative techniques to maintain output and unlock reserves which may previously have been considered prohibitively difficult to access.

Advanced technological solutions are also being applied to reduce emissions and drive decarbonisation.

UKCS operators who responded to the NSTA’s 2024 Technology Survey reported the deployment of a wide range of technologies across various activities – from drilling and well construction, to reservoir management, to emissions monitoring and recovery. Specific examples included the use of modular platform drilling rig systems, digital well planning using AI, and the implementation of flare gas recovery systems.

In their annual oil and gas report for 2024, BDO state that enhancing operational performance – including via the adoption of technological innovations – remains a top priority for companies in the sector.

The tax treatment of the UK oil and gas industry is complex, meaning that a comprehensive explication of its nuances is impossible here.

That said, some key issues of particular relevance to the upstream segment are outlined below. For detailed, official information, please refer to relevant HMRC material, such as the Oil Taxation Manual. In addition, the Library enquiry team have access to premium databases and can search case law in this area.

The EPL is a temporary “windfall” tax on a company’s ring-fence profits, introduced on 26 May 2022. From 1 November 2024 the EPL rate increased to 38%. At the same time, the 29% general investment allowance was abolished. It is due to end on 31 March 2030, though it may end before then depending on circumstances.

RFCT is the corporation tax charged on upstream oil and gas profits within a statutory “ring fence”, which prevents those profits from being reduced by losses from other (non-ring-fence) activities or by excessive interest deductions. The main ring-fence corporation tax rate has been fixed at 30% since 1 April 2008.

The SC is an additional charge on ring-fence profits, with no deduction for finance costs. As of September 2025 the supplementary charge rate is 10%.

PRT is a field-based tax that applies to “taxable fields” given development consent before 16 March 1993. Since 1 January 2016 the PRT rate has been set permanently at 0%, but the regime remains in force so that losses — notably from decommissioning — can be carried back to generate PRT repayments. PRT rarely gives rise to a current charge, but it can still be relevant to cash flow and decommissioning planning.

The size and diversity of the UK oil and gas industry means that any list of notable players will not be fully representative or comprehensive.

That said, some examples of noteworthy players are set out below.

• BP — British multinational oil and gas “supermajor”, vertically integrated across exploration and production, refining, and fuel distribution.
• Shell — British-based global oil and gas giant; vertically integrated and active in all industry segments – from exploration and production to refining, petrochemicals, and retail fuel marketing.
• Harbour Energy — the UK’s largest independent oil and gas producer, focused on upstream operations in the North Sea.
• EnQuest — independent UK-based oil and gas company operating primarily in the North Sea, with both upstream and midstream interests; specialises in mature field redevelopment.
• Serica Energy — British independent upstream oil and gas company focused on the North Sea, particularly natural gas assets; now among the top mid-tier North Sea producers.
• Ithaca Energy — North Sea-focused oil and gas producer based in Aberdeen, Scotland.
• INEOS — large privately-owned UK conglomerate with substantial oil and gas interests, including the Forties Pipeline System (a major North Sea pipeline).
• EET Fuels — refining and distribution company that operates the Stanlow refinery, one of the UK’s largest oil refineries.
• Centrica — multinational British energy company, based in Windsor; it supplies gas to millions of UK homes and also engages in gas storage and production.
• px Group — headquartered in Stockton-on-Tees; operates major gas processing and power infrastructure, including the Teesside Gas Processing Plant and the St Fergus Gas Terminal.

ICAEW’s Library & Information Service can provide information on UK and Irish participants in the oil and gas industry via its wide range of company information services. This includes:

• Information on company acquisitions in the sector
• Private company transaction multiples
• Company data
• Beta values for companies and the sector
• P/E ratios for companies and the sector

For more information, please contact our enquiry team on +44 (0)20 7920 8620 or at library@icaew.com to discuss your requirements.

• Association of British Independent Exploration Companies (BRINDEX)
• Association of Petroleum & Explosives Administration (APEA)
• Energy Industries Council (EIC)
• Energy and Utilities Alliance
• Energy Institute
• The London Energy Brokers' Association (LEBA)
• NOF Energy
• Offshore Energies UK (OEUK)
• Fuels Industry UK

• Energy Industries Council (EIC)
• Gas Exporting Countries Forum (GECF)
• International Association of Oil & Gas Producers (IOGP)
• International Gas Union (IGU)
• World Liquid Gas (WLGA)
• WPC Energy