North Sea oil, Part 2: who pays? Tax, bills, climate and Kent

Ministers say new North Sea licences would not cut bills; critics say Britain is giving away jobs, tax and security while importing more. In the second of two parts, Kent Local News tests both cases against the official record and sets out what it means for Kent homes, firms and the Isle of Grain.

The energy price cap rose to £1,723 a year on 1 October, a rise Ofgem blamed on the conflict in the Middle East, and diesel averaged 199.3p a litre in the week of 19 October, 40% more than a year earlier. With the Budget due on Wednesday 28 October, whether the North Sea can help is back at the centre of politics.

Part 1 of this investigation found that UK offshore output is 75% below its 1999 peak, that about 2.9 billion barrels of proven and probable reserves remain, and that the real dispute between the government and the industry is over roughly 3 billion more barrels that better tax and licensing terms might unlock. A return to 1999 levels is not possible on either side’s figures.

Part 2 looks at who pays: the government’s reasons for refusing new licences and its critics’ case, the way emissions are counted, what the North Sea is worth to the Treasury, whether more drilling would lower bills, and what it all means for Kent.

Why the government will not issue new licences

Labour’s 2024 manifesto said: “We will not issue new licences to explore new fields because they will not take a penny off bills.” It also promised to honour existing licences. Existing fields keep producing, and fields already licensed can still be approved: on 21 October the government approved the Jackdaw gas field in the central North Sea, while Rosebank, the largest field awaiting consent, has still to be decided. The government also plans “Transitional Energy Certificates”, to be created by its Energy Independence Bill, which would allow production from areas next to existing fields, tied back to them, without new exploration. On 21 October it asked the North Sea regulator to consider whether a small number of urgent projects of this kind could benefit from similar measures before the law is in place.

The government’s North Sea Future Plan, published in November 2025, gives its reasons. It says “awarding new licences to explore new fields would have a marginal impact on future production levels of oil and gas”, cites climate leadership “consistent with the science on limiting global average temperature rise to 1.5°C”, and adds that “oil and gas will remain an important part of our energy mix for decades to come”. Its consultation earlier that year was blunter on prices: “Domestically produced oil and gas does not mean cheaper oil and gas.”

The legal ground has also shifted. In the Finch case in June 2024, the Supreme Court ruled that the emissions from burning the oil a project produces are among its effects and must be assessed, which is why Rosebank and Jackdaw had to reapply.

Andy Burnham, Prime Minister since 20 July, has not changed the licensing policy. Challenged by Reform UK’s Richard Tice on 1 September, he said: “Yes, we need to be pragmatic—we will still need to rely on oil and gas for some years to come.” At Prime Minister’s Questions on 9 September he said: “I cannot comment today on quasi-judicial decisions, but we will take a pragmatic approach to oil and gas.”

One gap stands out. The government calls the effect of its licensing policy “marginal”, but Kent Local News has found no official estimate of how much production it gives up. The only published number is the industry’s. Kent Local News asked the Department for Energy Security and Net Zero on 12 October whether it had made one. The department had not responded by the deadline of 5pm on Wednesday 21 October.

The case for drilling more

The Conservatives would go the other way. Claire Coutinho, then the party’s energy spokeswoman, told its conference in October 2025 that a Conservative government would scrap the ban on new licences, reverse the Energy Profits Levy and repeal the Climate Change Act; Kemi Badenoch has said the regulator’s mission should be to “maximise extraction”. Reform UK’s Mr Tice told the Commons on 1 September: “It is madness to import gas from overseas when we have our own gas in the North sea.”

Katie Lam, Conservative MP for Weald of Kent, told MPs on 19 May that “it is profoundly dishonest to talk of energy independence while making us more dependent on energy imports from abroad. That is exactly what the Government’s plans to ban new North sea oil and gas would do.”

The economic costs are on the record. In 2025 the UK imported half the oil it used and 49% of its gas, and spent a net £14.9 billion on oil imports. The government itself says more than 70,000 North Sea oil and gas jobs were lost between 2016 and 2023. The industry body Offshore Energies UK says the industry supports about 180,000 jobs in total.

Not every Kent MP agrees with Ms Lam. In the same debate Polly Billington, Labour MP for East Thanet, cited Fatih Birol, head of the International Energy Agency, who she said had pointed out that “expansion of production of North sea oil and gas does not significantly improve the UK’s energy security”.

The climate case has an accounting gap

The government’s climate argument has a weakness in how emissions are counted. The UK’s legally binding carbon budgets measure the emissions released on UK territory. The Office for National Statistics (ONS) says those figures leave out emissions from producing the goods and services the UK imports. Gas produced in the United States or Qatar and shipped to the Isle of Grain counts against those countries’ totals, not Britain’s, even though Britain burns it.

The difference is large. The ONS put the UK’s territorial emissions at 384 million tonnes of carbon dioxide equivalent in 2023, but its full footprint, including emissions embedded in imports, at 699 million tonnes.

The type of import matters too. The North Sea Transition Authority (NSTA), the industry regulator, calculates that producing and delivering UK gas in 2024 emitted 28kg of carbon dioxide equivalent per barrel, against 85kg for imported liquefied gas, which is cooled, shipped and warmed again. Norwegian pipeline gas was lower still, at 8kg. When home production is replaced by liquefied gas, the UK’s official figures can improve while total emissions rise; replacing it with Norwegian pipeline gas would not have that effect. Ministers’ case rests on global climate leadership and on the emissions from burning oil and gas, which happen wherever the fuel comes from. The accounting gap concerns the emissions from producing and shipping it.

What the North Sea is worth to the Treasury

HMRC figures show government revenue from UK oil and gas peaked in cash terms at £12.4 billion in 2008-09, fell below zero in 2015-16 and 2016-17, and was £0.3 billion in 2020-21. The Energy Profits Levy, the windfall tax introduced in 2022, lifted receipts to £9.0 billion in 2022-23. They then fell to £6.1 billion in 2023-24 and £4.5 billion in 2024-25. Figures published by HMRC on 22 October show £4.3 billion for 2025-26, of which the levy raised £2.6 billion.

In March the Office for Budget Responsibility forecast that receipts would fall to £0.1 billion by 2030-31, assuming oil at around $68 a barrel and falling. The conflict in the Middle East changed the picture: the Bank of England says Brent crude peaked at a little under $120 on 31 March, up from $64 before the conflict, and by mid-September it was $106 a barrel, with UK wholesale gas at 207p a therm.

The levy is charged at 38%, taking the headline tax rate on North Sea profits to 78%. It runs until 31 March 2030, or earlier if oil and gas prices both average below set thresholds, currently $78.65 a barrel and 61p a therm, over six months. Current prices are well above both. From April 2030 it is due to be replaced by a permanent Oil and Gas Revenue Levy of 35% on revenue above $90 a barrel and 90p a therm, in draft legislation published in July. The industry wants the change brought forward in the Budget on 28 October.

The government also plans to spend some of the money. On 21 October Mr Shanks, the Minister for Energy, told MPs it would set up a North Sea energy wealth fund, which “will use tax revenues from North sea oil and gas to invest in net zero projects and support the green transition”, starting with “an initial £2 billion capital injection”.

UK energy costs are among the highest

Whatever the cause, British energy is expensive by international standards. Government figures show the UK had the highest industrial electricity price, including taxes and levies, of the 25 International Energy Agency countries that reported in 2024, and the second-highest household price. The ONS found that in 2023 UK industrial users paid almost 50% more for electricity than those in France and Germany, and four times as much as in the United States and Canada.

Against 14 large EU economies, the UK had the highest non-domestic electricity prices in the second half of 2025 and the fourth-highest household price, at 29.78p a kilowatt hour, according to the Department for Energy Security and Net Zero (DESNZ). For Kent firms and households the result is the same: energy takes a bigger share of costs here than in most competitor countries.

Would more drilling cut bills?

This is the sharpest disagreement. Ed Miliband, then Energy Secretary, said in April: “The price of these fossil fuels is set on the international market, regardless of where they come from.” Under the new government, energy minister Martin McCluskey told the Commons on 15 September: “More extraction of oil and gas from the North sea will not reduce prices for consumers across the country.” In the Commons on 24 March, Ms Coutinho called that argument “economically illiterate rubbish”.

The record explains why bills are so exposed. Ofgem says wholesale costs make up about 47% of the October price cap, and that “due to the role gas continues to have in setting power prices, the gas wholesale allowance is going up by 13%”.

Gas produced in the North Sea is sold at the same market price as gas piped from Norway or shipped from Texas. More home production keeps the money, the tax and the jobs in Britain and reduces exposure to shipping and supply shocks. Whether it would lower the market price, and so household bills, is the disputed part. Neither the government nor its critics have published an official estimate of a bill saving.

What it means for Kent

Kent has no North Sea jobs to speak of. The ONS business register records no employees in oil and gas extraction in Kent or Medway in 2024, against about 2,000 in electricity and gas supply in the Kent County Council area and 500 in Medway. The only onshore petroleum licence touching the county, near Westerham, lies mostly in Surrey, and no oil or gas field is recorded inside Kent.

Instead, Kent is where much of Britain’s imported energy arrives. Grain LNG, bought from National Grid by Centrica, owner of British Gas, and Energy Capital Partners for £1.5 billion in November 2025, employed an average of 216 people in the year to March 2025. Its owners describe its capacity as equivalent to up to a third of UK gas demand, though the company’s own published figures vary. In 2025, 77% of all liquefied gas imported into the UK came from the United States. Beside the terminal, the Grain (1,404 megawatts), Damhead Creek (805MW) and Medway (755MW) gas-fired power stations give the Hoo peninsula almost 3,000MW of generating capacity. Electricity cables from France land at Sellindge and Folkestone, and from Belgium at Richborough.

For households, the price of gas is the price of heating. DESNZ estimates that 8.8% of households in the Kent County Council area and 8.9% in Medway were in fuel poverty in 2024, below the England figure of 9.9%. The rate was highest in Thanet (10.4%), Dover (10.2%) and Folkestone and Hythe (9.8%). These are modelled estimates, which DESNZ says should be used to look at general trends.

About 98,600 Kent homes, 13.9%, are not connected to the gas grid, rising to 23.5% in Ashford, 22.7% in Tunbridge Wells and 19.5% in Sevenoaks. At the 2021 census 23,387 Kent households heated their homes with oil alone. They pay world oil prices directly, with no price cap. Mr McCluskey told MPs the government is studying the Competition and Markets Authority’s recent report on the heating oil market and will respond “in due course”. And 82.5% of Kent households own at least one car, which puts the county at the sharp end of a diesel price of nearly £2 a litre.

What happens next

The Chancellor, John Healey, delivers the Budget on 28 October, with a new OBR forecast that will have to account for wartime prices and for any change to the windfall tax. The Energy Secretary, Miatta Fahnbulleh, has yet to decide on Rosebank; Mr Shanks told MPs that decision “will be made in due course”. He also said the government is “looking at removing standing charges on gas bills at the earliest opportunity”. Ofgem announces the price cap for January to March on 25 November.

On the official evidence, the North Sea is not going back to 1999. The choice in front of ministers is narrower but still large: how much of what remains Britain produces itself, what that is worth in tax and jobs, and whether any of it reaches the bills paid in Kent.

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North Sea oil Part 2: how much do you know?

5 questions

Sources

Source documents: HMRC, the Office for Budget Responsibility, the Bank of England, Ofgem, DESNZ, the North Sea Transition Authority, the Office for National Statistics, the Supreme Court, Hansard, party documents and company filings, linked above.

Image: Stock image illustrating rising energy costs. Image: Getty Images / iStock

Published: 27 October 2026

Tax figures are from HMRC and the Office for Budget Responsibility; price figures are from the Bank of England, Ofgem and DESNZ; emissions figures are from the North Sea Transition Authority and the ONS; household figures are from DESNZ and the ONS, and fuel poverty figures are modelled estimates. Percentage changes and the Kent off-grid total are Kent Local News’ arithmetic from the published figures. Grain LNG figures are the company’s own and vary between its publications. Offshore Energies UK represents the industry’s view. Quotations from ministers and MPs are reported verbatim from Hansard and official publications. If you believe anything here is inaccurate, contact editor@kentlocalnews.co.uk — see our corrections policy.