Donald Trump’s online tirade against UK taxation on North Sea oil was, predictably, loud and unsubtle, but not without merit. “A TREASURE CHEST for the United Kingdom,” he called it, lamenting punitive taxation that deters investment. Though his delivery was typical of his style, the underlying point should make British policymakers pause. For decades, the UK has sat atop immense hydrocarbon wealth yet treated it more as a political inconvenience than a strategic asset.
Successive governments, left and right, have struggled to square the realities of energy economics with the public rhetoric of climate leadership. But with North Sea production declining, energy bills stubbornly high, and geopolitical instability driving home the perils of import dependence, the time for a reassessment is now overdue.
It is important to start with the facts. The UK still has an estimated 10 to 15 billion barrels of recoverable oil and gas beneath its continental shelf according to the North Sea Transition Authority. Production has fallen by 60 percent since 2000, but it remains a crucial part of Britain’s energy mix, contributing 38 percent of domestic gas and 75 percent of oil in 2023.
Yet investment in exploration and production has withered. The reason? Policy volatility, particularly since the introduction of the Energy Profits Levy in 2022. While intended to claw back windfall profits, the combined marginal tax rate on North Sea operators now sits at 75 percent, among the highest in the world. Even after recent tinkering, including the “price floor” mechanism introduced in 2023, the damage to investor confidence has been considerable. Shell and Harbour Energy have both scaled back UK projects.
In light of these persistent policy failures and the retreat of private operators, a compelling argument emerges for establishing a state-run oil company. This would not be unprecedented. Norway’s oil success was built on Statoil (now Equinor), a state-owned entity that allowed the country to maintain sovereign control over production, pricing, and environmental standards. Equinor remains majority state-owned and directly serves national policy aims, from renewable investment to energy security.
A British equivalent, perhaps modelled as the Great North Sea Energy Corporation, could fulfil a similar function. It would remove the dependency on the private sector’s confidence in government tax policy, enabling stable, long-term investment in strategic fields. Profits could be directly channelled into a sovereign wealth fund, insulating the Treasury from price volatility and ensuring the proceeds of extraction are retained for the public good.
Moreover, a publicly owned operator could prioritise carbon mitigation, pioneering best-in-class extraction practices, investing in offshore electrification and CCS, and ensuring rigorous environmental oversight. Crucially, the UK would no longer be held hostage to private firms mothballing fields or pulling capital in response to marginal tax changes.
In economic terms, the state would benefit from both upstream profits and downstream fiscal revenues, allowing a much higher return per barrel. According to analysis from the UK Infrastructure Bank, every £1 billion invested in upstream oil and gas delivers up to £2.8 billion in gross value added when operations and supply chain effects are considered. A publicly owned operator could retain a greater portion of that value within the UK economy.
The contrast with Norway could not be starker. Oslo, sitting atop comparable reserves, has turned its oil wealth into long-term national prosperity. Through the Government Pension Fund Global, Norway has built a sovereign wealth fund now worth over £1.4 trillion, or over £250,000 per citizen. It invests globally, acts counter-cyclically, and insulates the domestic economy from oil shocks.
More critically, Norway has managed this while remaining a climate leader. It generates 98 percent of its electricity from hydropower, subsidises EVs, and has a roadmap to decarbonise heavy industry with CCS and hydrogen. Crucially, it doesn’t treat its fossil fuels as a moral failing, but as a transitional asset. The revenues are used to fund the future, not to apologise for the past.
The UK, by contrast, has spent North Sea revenues on general expenditure, papering over deficits rather than investing in long-term energy resilience. In 1980, oil revenues made up 8 percent of total government receipts. Today, despite elevated prices, they are a political sideshow.
It's not just the North Sea. The Falklands Basin, according to some geophysical surveys, holds up to 1.3 billion barrels of recoverable oil. Even more speculative is the British Antarctic Territory, where some estimates suggest as much as 500 billion barrels, although any exploration is bound by the Antarctic Treaty, which prohibits commercial exploitation for now.
Still, these are clues to a larger truth: Britain has energy options, but it has consistently chosen not to use them. A kind of national allergy to hydrocarbons has taken root, fuelled by legitimate climate concerns but untethered from economic realism.
Yes, Britain has a net zero target by 2050. Yes, we need to decarbonise electricity, heat, transport. But the idea that new domestic oil and gas projects undermine these goals is disingenuous. As the Climate Change Committee (CCC) itself notes, domestic production is less carbon-intensive than imports. North Sea oil emits about half the CO₂ per barrel compared to LNG imports from Qatar or the US.
Moreover, the idea that global oil demand will vanish overnight is fantasy. The International Energy Agency predicts that even under its most ambitious scenario, oil will still make up 25 percent of global energy consumption by 2040. If the world is still buying oil, why shouldn’t Britain sell it?
What matters is what we do with the revenues. Rather than letting it seep into general budgets, the UK could adopt a Norwegian-style green sovereign wealth fund, capitalised by oil profits but directed at energy transition: hydrogen, CCS, grid infrastructure, and nuclear baseload. That would be genuine climate leadership, funded not by taxation or debt, but by our own natural endowment.
Then there are the jobs. The UK oil and gas sector directly supports 120,000 jobs, with a further 100,000 indirectly across the supply chain according to the OECD. These are not disposable roles, they are precisely the kind of engineering and technical skills needed for offshore wind, hydrogen and carbon storage. Preserving this workforce through a managed energy transition should be a national priority, not a fringe concern.
The North Sea Transition Deal, signed in 2021, aims to do exactly this, requiring industry to cut emissions by 50 percent by 2030 and committing £16 billion of investment in low carbon energy. But these ambitions need financing, and oil revenues offer a bridge.
The UK does not face a binary choice between oil and climate. What it faces is a choice between responsible self-reliance and the illusion of moral purity through offshored emissions and imported energy.
A publicly owned national oil company would give Britain long-term strategic control over a sector too important to be left to the mercy of market sentiment and quarterly earnings. It would secure investment, stabilise output, and allow the public to directly share in the benefits of national resources. It is time to end the ambiguity and establish a model that works for Britain.