Drilling activity in UK North Sea hits all-time low as EPL, licence ban dim prospects

Offshore drilling in the UK North Sea reached an all-time low in 2025, with no exploration wells spudded during the year. The outlook for 2026 does not look any brighter, with oil developers set to cut investments by about 40%.

It was the first time on record that an exploratory well had not been drilled during the year since offshore oil and gas activity began in the region some 60 years ago, according to a leading energy consultancy, Wood Mackenzie. Investment in the sector, estimated at £4.4Bn (US$5.9Bn) last year, is expected to plunge further by about 40% to £2.5Bn.

Weighing heavily on investment in the sector is the UK government’s energy policy and Energy Profits Levy (EPL). The government has issued a ban on new licences for new exploration, while the EPL applies a tax rate of 78% – a combination of a 38% windfall profit tax and a standard 40% oil and gas industry tax. The EPL is set to expire in March 2030.

At the end of November, the UK issued the North Sea Future plan, which maintains the ban on new licences for exploration of offshore oil and gas fields but does allow the issuance of new Transitional Energy Certificates to allow operators to tie back oil and gas production to existing fields or licensed fields. Developers will not be permitted to explore for oil and gas at these new sites under the plan.

Consolidation among oil developers continues to reshape the sector, with the latest deals seeing Shell UK and Equinor UK forming Adura, and TotalEnergies merging its UK offshore oil and gas assets with NeoNext Energy.

Poor spot rates for PSVs

As a result of the decline in offshore activity on the UK Continental Shelf, owners of platform supply vessels (PSVs) operating in the region would like to put 2025 behind them. Average spot day rates for both small and large PSVs in the region last year slid more than 17% year-on-year, according to a leading shipbroker.

In its year-end report, Seabrokers reported day rates for PSVs (<900 m² of clear deck area) were £8,263 in 2025, down 19% from £10,462 in 2024. Larger PSVs (>900 m²) did not fare much better, averaging day rates of £9,567, 17% lower than 2024, when rates averaged £11,570.

Day rates were particularly poor during July, August and September for all classes of PSVs. Spot rates for small PSVs averaged £4,280 in July, the poorest levels of the year and 69% lower than 2024, when rates hit £13,826. Average day rates were £4,974 for large PSVs in the same month, a drop of 65% from £14,408 in July 2024.

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