Plans to relax restrictions on new oil and gas drilling in the North Sea will be unveiled on Wednesday under the government’s North Sea Strategy.
Chancellor Rachel Reeves will announce the publication of the strategy in the Budget, the BBC understands. The Department for Energy Security and Net Zero will issue a document on it shortly after.
The strategy is expected to contain a more liberal interpretation of a manifesto pledge to ban new oil and gas exploration using more generous extensions of existing fields.
This idea for allowing new drilling in a way that can be “tied back” to existing fields was first floated at the Labour conference in September.
The results of the North Sea review will not directly reference the decision being considered by ministers over whether to give the go ahead to the controversial Rosebank field, which Ed Miliband was vocally opposed to while in opposition.
That project is the subject of a separate and ongoing regulatory and judicial process. However, the wider relaxation in rules is widely thought to increase the chances Rosebank will ultimately be approved.
Tiebacks have historically been used for small remote extensions to existing oil and gas fields which geologically stray into currently unlicenced areas of seabed.
Rosebank is a much larger facility which requires its own production infrastructure.
There has also been speculation that the windfall tax of 78% – due to expire in 2030 – might be phased out earlier.
The oil and gas industry has been lobbying hard in recent months for changes to the windfall tax, or energy profits levy, which they say has been crippling the industry.
Investment is at an all-time low with operators instead looking to spend their money in parts of the world with more favourable tax rates.
Research from Robert Gordon University in Aberdeen estimates that about 1,000 jobs a month are currently being lost.
It is understood the green light for “tie backs” would be viewed as a hollow gesture without at least some concessions on taxation.
A kind of “cap and floor” mechanism would seem like the most likely move from government, which would kick in if oil prices returned to high levels like they did in the aftermath of the Russian invasion of Ukraine.
The industry argues that subsequent falls in the price of crude oil demonstrate that the “windfall” has now ended and that taxation should reflect that change.
The chief executive of Aberdeen & Grampian Chamber of Commerce, Russell Borthwick, criticised the UK government, saying it has got its North Sea policy “badly wrong”.
“This is the first step towards addressing the damage that has already been done – but while the Energy Profits Levy remains in place, this change in isolation will not stem the loss of jobs and investment in our oil and gas industry,” he said.
Mr Borthwick said maintaining the EPL would “ensure that more jobs will vanish in their thousands”.
He predicted more companies leaving the North Sea.
“The Chancellor must signal a shift away from this tax today, and that shift must come in 2026 before it is too late,” he added.
