BP has put its North Sea oil division up for sale in the biggest show of dismay over the UK government’s tax policies.

The move will leave the British energy giant without any petrochemicals production in its home market for the first time in decades.

It told investors it planned to market its assets in the region as part of a major restructuring being overseen by boss Meg O’Neill, who took charge in April.

She is leading a reorganisation of BP’s business and a pivot back towards fossil fuels after a disastrous foray into renewable energy projects. 

Ms O’Neill had previously said the region had ‘untapped potential’ but operations have become increasingly challenging thanks to windfall taxes and the ban on drilling. 

The Energy Secretary Miatta Fahnbulleh said that she was in close contact with BP over the potential sale. 

BP has already offloaded its lubricant division Castrol and a host of its less productive gas assets as part of the drive that is targeting $20bn of divestments by the end of this year.

“The UK has been our home for more than 100 years and will continue to play an important role in our future,” Ms O’Neill said, adding: “However, as we focus our portfolio and direct capital to our highest-value opportunities, we believe our North Sea business will be better positioned as part of another company.”

BP’s connections to the North Sea go back to 1964 when it was awarded its first drilling licence and in 1970 discovered the giant Forties oil field.

Amid dwindling stocks it is the remaining major international oil company yet to consolidate its UK North Sea business. However it offloaded Forties in 2003 and the Forties pipeline system in 2017, and most recently its stake in the big Culzean gas field. Rystad estimates BP’s North Sea production this year will fall to the equivalent of about 86,000 barrels per day.

Its biggest remaining assets are the Clair Ridge and Schiehallion fields, though it operates five production hubs across the central North Sea and West of Shetland.

Wood Mackenzie says BP’s portfolio is “an attractive opportunity for the right buyer”, stating that its portfolio includes some of the longest-life assets on the shelf, including Clair, the largest producing oil field in the UK which could produce into the 2050s.

New UK-focused strategic venture Neo Next+ is a key candidate. Rystad has suggested that Neo Next+, Adura and Ithaca are all contenders, with Ithaca already having held talks with BP over a £2 billion sale earlier this year.

Reaction ranges from ‘inevitable’ to ‘stark reminder’

Chris Beauchamp, chief market analyst at investing and trading platform IG, said: “It says a lot when BP isn’t prepared to stick around to see if the new government can re-energise the UK’s energy policy.

“Clearly, BP thinks it will take too long at a time when the need to exploit new energy fields is pressing, and waiting around for Whitehall to move is not a prudent use of resources.”   

Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce, said: “Today’s announcement from BP should be a defining moment for the new Prime Minister. How many more jobs need to be lost before the UK Government acts?

“This decision is another stark reminder that confidence in the UK Continental Shelf has been badly shaken after years of policy uncertainty, punitive taxation and mixed messages about the future of the industry.

“The Prime Minister has spoken about taking a pragmatic approach to the North Sea. He now has an opportunity to turn those words into action.

“That means delivering on the commitment to replace the Energy Profits Levy with the Oil & Gas Revenue Levy – which includes a permanent windfall tax mechanism that would apply when prices are high – well before 2030. It is imperative that we create a stable, long-term fiscal regime and ensure our regulatory system can approve investment at the pace required.

“The North Sea remains one of the UK’s greatest strategic assets. It underpins our energy security, supports hundreds of thousands of skilled jobs and generates billions for the public finances. But unless investors have confidence that Britain is open for business, more capital, more jobs and more expertise will continue to leave.

“BP’s decision should not be viewed in isolation. It is the latest signal that the UK is at a crossroads. The new Prime Minister has a genuine opportunity to reset the relationship with our offshore energy sector and restore confidence before more investment is lost.

“Industry is not asking for special treatment. It is asking for certainty, stability and a policy framework that recognises the continued importance of domestic oil and gas while we build the energy system of the future.”

Scottish Conservative MP and shadow energy minister Andrew Bowie said: “BP has been drilling in British waters for six decades, but because of Labour’s disastrous Net Zero dogma it faces extinction.

“Andy Burnham should break with the past and do what the Conservatives have called for and immediately approve the Jackdaw and Rosebank sites and cancel their plans to ban on new licences in the North Sea.

“Only the Conservatives have a plan to Get Britain Drilling again by ending the licence ban, scrapping the Energy Profits Levy paid for by cancelling net zero projects, and securing high-skilled jobs for the future.”

SNP Westminster Leader, Dave Doogan, said: “Workers don’t want thoughts or warm words from the Prime Minister, we need decisive action to safeguard jobs, energy security and confidence in the North Sea. 

“What we have here is an historic business that has employed thousands of Scottish workers and a major part of the Scottish economy opting to leave the North Sea. The destruction of one of Scotland’s foremost industries is happening right before our very eyes.” 

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