29th October 2026
The Chancellor's latest Budget contains an important assumption about the future of North Sea oil and gas. The Office for Budget Responsibility (OBR), the independent watchdog responsible for checking the Government's economic and financial forecasts, has included expected production from the controversial Rosebank oilfield when estimating future tax revenues.
The problem is that Rosebank has not yet received the necessary fresh approval to proceed. Its future remains uncertain, with the Government facing competing arguments over energy security, jobs, climate commitments and the public finances.
The question is not simply whether Rosebank should be developed. It is whether the Treasury should rely on tax revenues from projects that have yet to receive final consent.
What the OBR has included in its calculations
In its economic and fiscal outlook, published alongside the Budget on 28 October, the OBR forecast that oil and gas receipts would raise £5.1 billion for the Treasury in 2026–27.
That figure covers tax revenues from the North Sea as a whole, not Rosebank alone. However, the OBR's production assumptions include estimates from the North Sea Transition Authority covering new fields, including Rosebank, as well as future discoveries.
The distinction matters. The Government has not announced a final decision on Rosebank, yet the production estimates used in its public-finance forecasts already assume that some prospective developments will eventually proceed.
The issue was raised in Parliament on Budget Day. Conservative MP Andrew Bowie questioned how the public could be given clarity about the future of Rosebank when the OBR's forecasts already included its anticipated production.
The OBR is not deciding whether the field should be approved. Its job is to estimate what is likely to happen, using the information and assumptions available to it. Nevertheless, those assumptions have consequences for the figures the Chancellor uses to plan public spending and taxation.
Rosebank's potential contribution
Rosebank lies west of Shetland and is one of the largest undeveloped oilfields in UK waters. Its developers argue that the project could support skilled employment, attract investment and generate substantial tax receipts.
The companies behind Rosebank and the Jackdaw gasfield have estimated that the two projects together could generate £1.4 billion in tax before the end of the current Parliament, rising to £3.8 billion by the end of the next.
These are industry estimates, not guaranteed receipts independently confirmed by the OBR. Actual tax payments would depend on production, oil and gas prices, costs, capital allowances and the tax rules in force.
Nor should the combined estimate be mistaken for Rosebank's individual contribution. The two developments are separate projects, and neither a field's estimated value nor the amount of oil it contains tells us exactly how much tax the Treasury will collect.
The timing also matters. Even if Rosebank receives approval, the anticipated production and tax revenues will arrive over time rather than as an immediate windfall.
Why North Sea tax revenues are uncertain
Oil and gas taxation has always been difficult to forecast. Receipts can change sharply when prices rise or fall, while production declines as older fields become depleted.
The tax system adds another complication. Companies pay tax on taxable profits, not directly on the total value of the oil they extract. Development expenditure, operating costs and tax allowances can substantially affect the amount collected.
The history of North Sea revenues illustrates the problem. Receipts rose dramatically during the energy-price surge of 2022–23, reaching £9.9 billion, before falling as prices and production changed. The OBR has repeatedly warned that oil and gas revenues are particularly sensitive to prices, output and expenditure.
A new field can help slow the decline in production, but it cannot eliminate the wider uncertainties affecting the industry.
That means the Treasury must avoid treating prospective North Sea revenues as if they were a dependable, permanent source of income.
The political argument over approval
Rosebank's original approval in 2023 was challenged successfully in court because the assessment did not adequately account for emissions produced when the extracted oil and gas were eventually burned. The project must therefore pass through the relevant fresh approval process.
Supporters argue that the UK will continue to need oil and gas for years, that domestic production supports jobs and investment, and that refusing new developments could increase reliance on imports.
Critics question the climate implications, the economic case for new oil production and the extent to which the financial benefits would remain in the UK. They also argue that approving a field does not automatically reduce energy bills, because oil and gas prices are influenced by international markets.
Both the energy-security argument and the environmental objections deserve scrutiny. But neither should be confused with the narrower question of whether the Treasury will actually receive the tax revenues assumed in its forecasts.
The final decision on Rosebank remains a regulatory matter. Including the field in the OBR's assumptions does not itself grant permission to develop it.
What happens if Rosebank does not proceed?
If Rosebank is refused and other anticipated developments also fail to materialise, North Sea production could fall faster than assumed. That would put some of the expected tax receipts at risk.
It would not follow that the entire forecast revenue would disappear. The £5.1 billion estimate includes receipts from existing fields and other sources, and the OBR's assumptions cover more than Rosebank.
Nor can we conclude that rejecting the project would automatically create a particular tax shortfall. The amount would depend on the timing of production, prices, costs, other developments and the effect on the wider industry.
The Treasury would have to take account of any resulting change in revenues in subsequent forecasts. If the shortfall were significant and other parts of the Budget remained unchanged, the Government might face less room for spending, tax reductions or meeting its fiscal targets.
That is why forecasts based on uncertain future production deserve close attention.
A lesson for future Budgets
The controversy exposes a wider difficulty for the UK economy. North Sea oil and gas can still generate jobs, investment and tax revenue, but the industry is mature and its future output cannot be taken for granted.
Meanwhile, renewable energy and other low-carbon industries require investment and time to develop. The transition does not remove the need to manage the public finances carefully in the meantime.
The OBR's job is to make the best forecast it can, not to decide energy policy. The Government's responsibility is to explain the assumptions behind its plans and to be clear about the risks if expected production does not materialise.
Rosebank may eventually proceed and generate substantial revenues. It may not. Either way, the public should be able to distinguish between money already being collected, income reasonably expected from existing production, and tax receipts that depend on projects still awaiting approval.
A forecast is not a bank balance. When the Chancellor plans the nation's finances, that distinction matters.