BP is putting its North Sea business up for sale, signaling an end to six decades of oil and gas production in the region. The company cited the impact of increased taxes and the government's Net Zero drive as key factors in the decision.
Ministers were informed of the announcement on Friday, with some calling it a "deadly serious wake up call" regarding the future of the UK's natural resources. This comes just a day after Prime Minister Andy Burnham suggested that North Sea oil revenues could help alleviate the cost of living crisis, hinting at a potential shift in Labour's stance on new drilling.
Experts have estimated that lifting previous bans on new drilling could generate up to £25 billion in additional tax revenues for the UK over the next decade and support numerous jobs. However, BP's decision means it will no longer be part of these potential future North Sea operations as it streamlines its global business.
BP Chief Executive Meg O'Neill stated that while the North Sea is integral to the UK's energy system, the company is focusing its portfolio and capital on higher-value opportunities. "We believe our North Sea business will be better positioned as part of another company," O'Neill said.
Earlier this year, BP reportedly held talks with Ithaca Energy for a deal estimated to be around £2 billion for the North Sea business, which employs approximately 1,100 people, but no agreement was reached. BP currently operates five key production hubs in the North Sea, including the Clair oilfield.
Energy Secretary Miatta Fahnbulleh confirmed she is in close contact with BP regarding the potential sale. "The North Sea is a vital national asset and we will take a pragmatic approach, recognizing that oil and gas will be part of our energy mix for years to come," she said. Fahnbulleh added that her priority is to ensure the protection of workers and the local community during the sale process.
Senior Conservative MP Andrew Griffith, the shadow business secretary, commented on the situation, calling it a significant moment and a "deadly serious wake up call" for Britain to remain competitive in attracting energy, capital, and talent.
BP's move follows Prime Minister Burnham's recent remarks about adopting a "pragmatic" approach to drilling in the region. He indicated that in times of economic hardship, a resource like the North Sea cannot be ignored. There have been calls for the government to expedite approvals for new drilling projects, such as the Rosebank oil field and Jackdaw gas field.
Despite exiting North Sea production, BP has affirmed that its headquarters will remain in the UK. O'Neill noted that the UK has been BP's home for over 100 years and will continue to be important to its future. The company highlighted its contributions to the UK economy and job creation.
In related news, it was reported earlier in the week that BP was planning to cut approximately 700 jobs in its upstream division, which focuses on oil and gas discovery and extraction. These cuts are intended to streamline the company and improve returns amid indications of potential oversupply and lower oil and gas prices.