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Finance

Factbox-The fall of UK North Sea oil and rise of offshore wind

Published by Global Banking and Finance Review

Posted on January 3, 2025

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(Reuters) - The British North Sea is one of the world's oldest offshore oil and gas basins where production has been in steady decline since the early 2000s. At the same time, the region has become one of the world's largest and fastest growing offshore wind basins.

U.S. President-elect Donald Trump called to "open up" the British North Sea and get rid of what he called windmills in a post on his social media platform Truth Social on Friday.

Below are some facts about the North Sea:

OIL AND GAS PRODUCTION

Exploration for oil and gas in the North Sea started in the 1960s and commercial production started in 1975. The basin reached peak output of 4.4 million barrels of oil equivalent per day (boed) at the start of the millennium.

Production has since declined as reservoirs depleted, reaching around 1 million boed in 2024, according to the North Sea Transition Authority (NSTA) regulator.

It said output is set to fall to around 660,000 boed by 2029.

TAXATION

In October, the British government increased a windfall tax on North Sea oil and gas producers to 38% from 35%, bringing the headline tax rate on the sector to 78%, among the highest in the world. The duration of the Energy Profits Levy (EPL) was extended by a year to March 2030.

The government wants to use the revenue from oil and gas to raise funds for renewable energy projects.

A 25% windfall tax was introduced by the Conservative government in May 2022 following a surge in energy prices linked to Russia's invasion of Ukraine. The tax was increased to 35% in November 2022, and extended by one year in March 2024.

INVESTMENTS

Oil and gas companies, including Shell, Exxon Mobil and Chevron, have retreated from the North Sea in recent decades to focus on newer basins.

Since the introduction of the EPL, producers have sold assets, merged operations and sought to diversify to other regions.

Spending on oil and gas production in the North Sea is expected by the NTSA to decline from 11.7 billion pounds ($14.5 billion) in 2020 to 8.5 billion pounds ($10.55 billion) by 2029.

OFFSHORE WIND

Britain has almost 15 gigawatts (GW) of offshore wind farms around its coast and a target to quadruple this to reach 60 GW by 2030.

The North Sea is host to what will be the world's largest offshore wind farm Dogger Bank. The 3.6 gigawatt (GW) wind farm is being built by Britain's SSE and Norway's Equinor and Vargronn in three phases.

When complete, it will create enough electricity to power around 6 million homes, and a fourth phase that could add a further 2GW is also being considered.

($1 = 0.8059 pounds)

(Reporting by Ron Bousso and Susanna Twidale)