Investment in the UK oil and gas sector has seen a sharp decline in recent years, with the number of approved projects dropping from 16 in 2024 to just three last year, according to data from the EY UK Attractiveness Survey. This decrease comes amid the Labour Party’s policy to ban new oil and gas drilling licences in the North Sea, as outlined in its manifesto, alongside continued application of a windfall tax on the industry.

The Labour government has also accelerated several Net Zero targets as part of a broader strategy to shift towards renewable energy sources, which critics argue has contributed to the reduction in oil and gas investment. The EY report additionally highlights a broader downturn in foreign direct investment projects across the UK, falling from 55 in 2024 to 27—the lowest level recorded since 2013.

Labour officials acknowledge that the North Sea oil and gas sector faces significant challenges, with party figures projecting that more than 100,000 jobs in the industry could disappear over the next 25 years. This raises concerns about the economic impact on communities reliant on the sector.

Despite the current restrictions, Prime Minister Andy Burnham has indicated a possible change in Labour’s stance, suggesting that the government may approve new drilling projects in the near future. Energy Secretary Miatta Fahnbulleh is expected to approve gas drilling at the Jackdaw field off the coast of Aberdeen. However, a decision on the Rosebank field, which is the largest untapped oil reservoir in the North Sea, is anticipated to be postponed.

Supporters of Labour’s approach argue that the focus on renewables and the ban on new drilling licences align with long-term environmental goals aimed at reducing carbon emissions and combating climate change. They maintain that transitioning away from fossil fuels is necessary to meet the UK’s climate commitments.

Conversely, opponents contend that the ban and taxation policies have deterred investment, risking energy security and economic stability, particularly in regions dependent on the oil and gas industry. They warn that delays in approving major projects like Rosebank could hinder the UK’s ability to produce domestic energy and lead to job losses.

As the government weighs its next steps, the future of the UK’s oil and gas industry remains a contentious issue, balancing economic considerations with climate policy objectives.