What’s next for energy in the North Sea?

The North Sea is entering a period of real change. For many businesses, this will feel less like a clean transition and more like a balancing act.

The Autumn 2025 Budget and the Government’s North Sea Future Plan set a clear direction of travel. It provides a blueprint for transitioning the North Sea from oil and gas to clean energy. But they also raise difficult questions around investment certainty, workforce transition and the long-term shape of the basin.

Support for existing oil and gas activity will continue, alongside an accelerated push towards clean energy. For operators, supply chains, investors and infrastructure providers, the implications are immediate. Decisions being taken now on licensing, tax exposure, workforce planning and ESG risk will shape commercial viability for the next decade.

This is no longer just about long-term strategy. It is about managing near-term risk while positioning for transition.

Recent developments – key legal and commercial implications

Licensing

No new oil and gas exploration licences will be issued. Instead, Transitional Energy Certificates (TECs) will allow limited additional production linked to existing fields and infrastructure, without new exploration.

While this preserves activity, it also reshapes the market. The new regime is likely to favour larger, well-capitalised operators with established assets, narrowing options for new entrants and standalone projects.

Fiscal policy

The Energy Profits Levy will be replaced by a new Oil and Gas Price Mechanism from March 2030. Like the EPL, the OGPM will operate as a windfall-style tax on upstream oil and gas activity in the UK and on the UK Continental Shelf.

The mechanism will be revenue-based, applying an additional 35% tax above price thresholds of $90 per barrel for oil and £0.90 per therm for gas, indexed to CPI. Draft legislation will be consulted on ahead of introduction in the next Finance Bill.

For many businesses, the challenge will be managing uncertainty. Tax exposure will remain closely tied to volatile commodity prices, complicating investment and financing decisions.

Decommissioning

Decommissioning is no longer a future issue. It is happening now.

Operators are facing increasingly complex obligations at the same time as transition planning and funding pressures. Contractual, environmental and financial risks are converging.

New legislation also confirms that no payments can arise under a Decommissioning Relief Deed in relation to the Energy Profits Levy, removing access to tax relief on decommissioning expenditure in that context and increasing financial exposure for some operators.

Workforce transition

The Government has acknowledged that the energy transition depends on supporting the existing workforce.

A new North Sea Jobs Service is intended to provide end-to-end career transition support, including reskilling for offshore workers moving into renewables, hydrogen and carbon capture, partnerships with education providers to deliver certified training, and financial support for relocation and career development.

The ambition is clear. Delivery will be key, particularly in translating training into deployable skills for highly specialised offshore roles.

ESG and climate litigation risk

ESG is no longer a secondary consideration. Misalignment between transition plans, public disclosures and operational reality is increasingly driving regulatory scrutiny and litigation risk.

Businesses will need robust, defensible ESG strategies that stand up to both investor and regulatory challenge.

Looking ahead

Over the next decade, the Government expects up to 1.1 million jobs to be created across clean energy and associated sectors, drawing heavily on existing offshore expertise.

For businesses, this means:

• Reassessing diversification and clean energy investment opportunities
• Managing evolving regulatory and workforce transition obligations
• Accessing government-backed training schemes
• Preparing for enhanced scrutiny from the North Sea Transition Authority

These issues will rarely arise in isolation. Most will need to be addressed in parallel.

How we can help

At Shakespeare Martineau, we support clients through the practical realities of transition. We advise on licensing strategy, tax and decommissioning risk, clean energy investment structures, and workforce and ESG obligations.

We work with operators, developers, investors and supply chain businesses to manage risk, navigate uncertainty and move forward with confidence as the regulatory and commercial landscape continues to evolve.