Details

Written by: J C Burke

Published: 27 November 2025

Last Updated: 27 November 2025

Hits: 67

• Energy Efficiency
• Energy Conservation

Based on the NESO report released yesterday (26th November 2025 - hidden behind the Budget fiasco??) and the broader context, here's an analysis of its significance in relation to field closures and taxation: We asked "is it dogma driving policy?"

Preamble:

"We are all missing the fundamental point: We're wasting 40-60% of energy through inefficiency."

Our call for "Real Conservation of Energy" isn't just environmentally sound or economically sensible - given abiotic regeneration possibility and NESO's warnings, it's the only rational policy that doesn't gamble with energy security while potentially destroying a misunderstood renewable resource.

The NESO Report's Key Findings

NESO warns that UK gas availability is projected to fall by 78% by 2035 compared to current levels, dropping from 24.5 billion cubic metres this year to just 5.4 billion cubic metres by 2035. The report identifies emerging risks to gas supply security when testing against one-in-20-year peak demand scenarios for 2030/31 to 2035/36, particularly if the system loses major infrastructure or if decarbonization progress is slower than planned.

The Taxation Context

The timing of this warning is particularly significant given the government's recent tax changes. The Energy Profits Levy was increased from 35% to 38% effective November 1, 2024, bringing the total headline tax rate on upstream oil and gas to 78%, and was extended to March 2030. Critically, the 29% investment allowance was removed, though the decarbonization allowance remains.

The Connection Between Taxation and Declining Production

The industry argues there's a direct link between the tax regime and accelerating decline:

• No new exploration wells have been drilled in 2025, and domestic oil and gas production has fallen by 40% in the last five years and is on course to halve again by 2030
• Industry modeling shows that without fiscal reform, oil and gas production will fall by approximately 40% from 2025 levels within the next five years
• The Energy Profits Levy has resulted in an increase in decisions to cease production, leading to higher decommissioning costs in the short term

The Decommissioning Acceleration

Annual decommissioning expenditure in the UK Continental Shelf surpassed £2 billion for the first time in 2024, accounting for 15% of total oil and gas expenditure, with projections indicating this share may double and exceed 30% by the end of the decade. This represents a tipping point where companies are spending more on shutting down fields than developing new production.

Read more: The Conservation of Energy