Is Domestic Oil & Gas the Answer?

Is Domestic Oil & Gas the Answer? What Plimsoll's Industry Data Tells Us

The UK could produce up to half its projected oil and gas demand domestically—if, and only if, the “right business conditions” are created. That’s the central claim from Offshore Energies UK (OEUK), the leading trade body for the industry, in its latest annual business outlook. The report comes as the government weighs up fiscal and environmental policy changes affecting North Sea production.

OEUK argues that with current policies, the UK is on track to produce 4 billion barrels of oil and gas equivalent by 2050—just under one-third of the projected national demand of 13 to 15 billion barrels. However, the group says an extra 2–3 billion barrels could be unlocked if investment is encouraged, potentially adding £150bn in value to the economy.

The key requirement? A reduction in the 78% headline tax rate on producers, which includes the temporary windfall tax introduced during the 2022 energy crisis. OEUK also urges support for existing licences and infrastructure, warning that heavy reliance on carbon-intensive LNG imports - especially from the US - will undermine net zero goals.

Yet critics, like Uplift’s Tessa Khan, accuse the industry of “peddling a fantasy” and argue that prolonging fossil fuel reliance is both economically and environmentally irresponsible.

So, what does the data actually say about the health and trajectory of the UK’s oil and gas sector?

To answer that, we turn to Plimsoll’s in-depth analysis of the UK Oil & Gas market - an independent financial lens on an industry facing both opportunity and uncertainty.

A Sector in Flux: What Plimsoll's Report Reveals

Plimsoll's market report evaluates 607 leading companies in the UK Oil & Gas sector, using a proprietary model to categorise each one based on financial strength, acquisition potential, and long-term viability. What it finds is a mixed landscape - one of modest growth, sharp contrasts, and a strategic crossroad.

• Average industry growth in the last year is just 3.5%.
  This indicates the sector is not in freefall, but nor is it thriving. It reflects an industry caught between global price volatility, regulatory pressure, and the longer-term shift to renewables.
• 113 companies are classed as ‘Serial Loss Makers’.
  These firms are consistently unprofitable and likely struggling under the burden of high taxation, reduced demand, and expensive operations - particularly relevant for North Sea-focused businesses. If OEUK's calls for tax reductions go unheeded, this cohort could grow.
• 147 companies are rated ‘Highly Attractive’ for acquisition.
  Despite headwinds, there is clear appetite for consolidation. These companies have strong fundamentals and are well-positioned for investment, particularly if policy changes improve margins or de-risk capital deployment.
• A rising number of firms fall into ‘Caution’ or ‘Danger’ ratings.
  Plimsoll's financial health ratings show a notable segment of the market operating on thin ice. These businesses are especially sensitive to swings in energy prices and policy uncertainty. It adds credence to OEUK’s argument that consistent regulation and tax clarity are vital to long-term viability.

Balancing Investment Incentives with Industry Realities

While OEUK makes a strong case for unlocking more domestic oil and gas, Plimsoll’s data tells us that many companies may be in no position to scale up without significant policy support. The 78% tax burden has created a capital freeze for some operators. Combined with declining returns (a historic low of -1% projected for the year to June 2024), this helps explain investor hesitancy.

Moreover, Plimsoll’s identification of highly attractive acquisition targets suggests that the sector is ripe for restructuring. With the right fiscal signals, we could see increased merger activity, fresh private equity interest, or international buyers looking to expand their UK footprint.

But caution is warranted. The fact that over 100 firms are running at consistent losses underlines the risk of assuming a simple policy tweak will solve the sector’s problems. Even with improved conditions, some companies may not survive the transition.