Photo by Ben Wicks
A possible exit
BP has held advanced discussions with Ithaca Energy over the potential sale of its UK North Sea assets in a deal that could be worth close to £2 billion, the Financial Times first reported this week. Although the talks have stalled in recent weeks, BP is understood to remain open to pursuing a transaction with other buyers as part of a wider programme of asset disposals. Both companies declined to comment.
If completed, a sale would mark a major departure for one of the basin’s longest-standing operators, and is widely viewed as the clearest signal yet that the UK government’s tax policy is reshaping the offshore energy landscape.
BP’s North Sea legacy
BP has operated in the North Sea for more than 60 years and was the first major company to extract oil from the region. It currently holds interests in 20 to 25 producing fields across five key production hubs, including the Clair oilfield, the largest on the UK Continental Shelf, and remains one of Britain’s top corporate taxpayers, paying £1.2 billion to the Treasury in 2024 alone. Its UK assets produce around 120,000 barrels of oil equivalent per day, a relatively small share of its global output of 2.3 million barrels per day.
A turbulent year at the top
The reported discussions follow a turbulent period at BP. Meg O’Neill became chief executive on 1 April, the first CEO appointed from outside the company, and has moved swiftly to restructure the business, reorganising it into two main units (upstream and downstream) and targeting $20 billion of asset sales by 2027 to reduce debt and simplify the portfolio, following pressure from activist investor Elliott Management. Last month O’Neill ordered an internal review of BP’s North Sea operations.
The company’s board is also in a period of acute instability following the sudden removal of chairman Albert Manifold just eight months into the job, over what BP described as “serious concerns raised to the Board related to important governance standards, oversight and conduct.” Manifold has disputed the characterisation and is understood to be considering legal action. Ian Tyler, BP’s interim chairman, said the search for a permanent replacement would be “a rigorous process involving the entire board and the final decision will reflect our collective view.”
The tax backdrop
The reported sale talks have become a focal point for wider industry frustration with the Energy Profits Levy. The windfall tax currently pushes the effective tax rate on North Sea producers to 78%, and BP’s own annual report, covering 2025, stated that Labour’s decision to increase the levy by 3% and extend it from 2028 to 2030 had cost the company an extra £539 million. The report warned the levy had “created significant uncertainty for the UK’s oil and gas industry.”
The pressure intensified last month when Chancellor Rachel Reeves launched a fresh tax measure on the sector, scrapping a rule that had allowed oil and gas companies to offset UK profits against losses from foreign subsidiaries. The change, expected to raise hundreds of millions of pounds a year for the Treasury, is being used to fund £1.8 billion of cost of living support. It was welcomed by environmental campaigners, with Greenpeace describing it as “exactly the kind of action we’ve been calling for.” Industry, however, has raised concerns about the cumulative impact on investment.
Offshore Energies UK, the sector trade body, said last year that the North Sea industry was already losing around 1,000 jobs a month as companies cut their workforces.
A political flashpoint
The tone from government ministers has also drawn industry criticism. Energy Secretary Ed Miliband described BP’s profits earlier this year as “morally and economically wrong” in a social media post he later deleted, following what BP called “exceptional” earnings of £2.4 billion in the first quarter, linked to oil trading on the back of the Iran conflict. Leading executives, including the bosses of British Gas and Octopus Energy, have since urged Miliband to reconsider his approach to North Sea policy.
Only weeks ago, energy executives presented proposals to the Treasury for an estimated £17.5 billion investment programme across the North Sea, contingent on a shift towards a more predictable long-term framework, including a proposed Oil and Gas Price Mechanism. Reeves is reported to have stepped back from that package amid global energy market volatility, with government officials arguing that geopolitically-driven oil price spikes would generate significant profits for producers regardless. According to reporting in The Times, one senior industry source described the tax regime as having “all but wiped out” profitability in some areas, while another warned that failure to reform the fiscal framework would represent “economic illiteracy on steroids.”
The UK Government’s position, which it has restated repeatedly in recent months, is that it is “giving the sector and its investors the long-term certainty to plan, invest and support jobs with plans to replace the Energy Profits Levy when it ends by 2030 or earlier, if its price floor is triggered,” and that it is also “making sure the North Sea has a prosperous and sustainable future through record investment that helps deliver the next generation of skilled jobs, while growing the clean energy industries of the future.”
A wider strategic retreat, and the policy backdrop
The North Sea discussions form part of a much broader pullback by BP from UK energy. In February 2025, the company announced a “strategic reset”, scrapping a target to grow renewables generation 20-fold by 2030, cutting more than $5 billion a year from low-carbon spending, and refocusing on oil and gas. Then-CEO Murray Auchincloss said the company had gone “too far, too fast” on the energy transition and that BP’s earlier faith in green energy had been “misplaced.” In July 2025, BP sold its US onshore wind business to LS Power, completing its exit from US wind generation. Its remaining offshore wind assets, including the UK Morven and Mona projects, have been moved into JERA Nex bp, a capital-light joint venture with Japan’s JERA.
The wider UK policy backdrop is also shifting. The government’s North Sea Future Plan, published in November 2025, confirmed Labour’s manifesto commitment to issue no new oil and gas exploration licences in the basin. However, the plan also introduced Transitional Energy Certificates, a mechanism allowing limited new drilling linked to existing fields and infrastructure. The policy is therefore a managed transition rather than a hard stop. Pressure to reverse the ban has nonetheless been building, with the Tony Blair Institute calling on the government in early 2026 to lift the restriction and cut the windfall tax. For a potential BP exit, the policy context matters less for new exploration, which BP isn’t pursuing, than for the long-term outlook of the assets being sold. Any buyer is acquiring fields in a basin that cannot be grown by new exploration, only by maximising recovery from what is already there.
Consolidation in the basin
Ithaca Energy, an Aberdeen-headquartered company and one of the largest independent producers in the basin, was seen as a natural counterpart in the discussions given shared interests in fields such as Vorlich. The stalled talks are the latest episode in a broader consolidation of the North Sea. Recent transactions have included TotalEnergies combining its UK assets with Neo Energy, and the creation of Adura, a joint venture between Shell and Equinor. BP has been notable as the only major yet to participate in that wave, making its reported willingness to explore a sale particularly significant. BP has already sold its stakes in the Shearwater field, Magnus platform and the Forties pipeline in recent years.
As STV noted, BP wouldn’t be the first major operator to leave the basin, and won’t be the last. But as a pioneer of oil in the region with deep historic ties, its exit would be the most symbolic yet, with implications for the thousands of staff, many of them in Aberdeen, who work on BP’s UK operations.