North Sea Oil Supply Declines: Implications for Investors in 2025 and Beyond

The North Sea’s oil production is on an inevitable downward trajectory, with projections indicating a further decline in June 2025. This shift, driven by maturing fields, policy shifts, and the global energy transition, poses significant challenges for investors in traditional energy assets while creating opportunities in adjacent sectors like renewables and carbon capture.

The Decline in Context

North Sea oil output has already fallen by 72% since 1999, with the North Sea Transition Authority (NSTA) forecasting an 89% drop in production by 2050 compared to 2024 levels. For 2025 alone, the NSTA projects crude oil production to average 0.53 million barrels per day (mb/d)—a 4% decline from 2024’s 0.56 mb/d and part of a broader 7% annual decline rate. This trend reflects the depletion of accessible reserves and a strategic pivot toward clean energy by the UK government.

Key Drivers of the Decline

1. Maturing Fields and Decline Dynamics
   The North Sea is a mature basin, with most easily accessible reserves already extracted. The NSTA estimates that future production will come almost entirely from existing fields or those under development, with no new licenses granted for exploration. This limits the potential for production rebounds.

2. Policy Pressures
   The UK’s 78% Energy Profits Levy on North Sea operators—introduced by the Labour government in 2024—has deterred investment in maintenance and exploration. This tax, combined with a ban on new licenses, has accelerated the exit of smaller operators and reduced capital spending.

3. Workforce and Supply Chain Challenges
   Direct oil and gas jobs have fallen by 37% since 2016, dropping to 121,000 in 2023. Projections suggest further losses to 60,000–87,000 jobs by 2030. While skills are transferable to renewables, the transition has left gaps in expertise critical to maintaining aging infrastructure.

4. Geopolitical and Operational Risks
   Sabotage of undersea cables and pipelines—such as attacks on North Sea infrastructure—has increased, with NATO boosting its presence in response. Additionally, conflicts in the Red Sea and geopolitical tensions between China and Taiwan could disrupt global supply chains, indirectly impacting North Sea logistics.

Implications for Investors

1. Risks in Oil-Dependent Assets
   Companies with significant North Sea exposure face headwinds. Maintenance delays, rising costs, and policy uncertainty could reduce profitability. Investors should scrutinize firms’ reserve lifespans and exposure to declining fields.

2. Opportunities in Transition Sectors
   The UK’s £20 billion offshore wind investment pipeline and plans for carbon capture and storage (CCS) hubs offer alternatives. For example, Equinor’s Hywind Scotland floating wind farm and Shell’s Net Zero Teesside project highlight the shift toward renewables and low-carbon technologies.

3. Geopolitical Hedging
   Investors should consider diversifying into energy sectors less tied to North Sea output, such as LNG in the US or African oil fields.

Conclusion

The North Sea’s oil decline is a structural inevitability, with June 2025 marking another step in a decades-long trend. With production projected to fall to 0.53 mb/d this year—down from 0.77 mb/d in 2021—the era of the region as a major oil producer is ending. Investors should prioritize:
- Firms with diversified portfolios in renewables or low-carbon projects.
- Companies with exposure to critical infrastructure maintenance, as demand for skilled labor and equipment persists.
- Policy resilience, given the UK’s punitive taxes and transition goals.

The transition to clean energy is creating winners and losers. Those focused on the North Sea’s fading oil legacy may find themselves stranded, while those adapting to the UK’s renewable future stand to gain.