An oil and gas heavyweight has made a find in the North Sea that underlines the exploration potential of the area, but which could fuel controversy about the industry’s future.

News of the find made by Neptune Energy came as tempers flared at the COP28 climate summit after proposals for a phase-out of fossil fuel use were diluted amid reported opposition from Saudi Arabia.

The move infuriated environmental campaigners, who want an end to oil and gas exploration and production activity in the North Sea.

The Scottish Government has recommended a presumption against exploration on environmental grounds and also for economic reasons. It has noted claims that the chances of making more big finds in what is a well-worked area are slim.

The news from Neptune makes uncomfortable reading for Holyrood ministers. The find the company made could contain up to around 20 million barrels recoverable oil equivalent (mmboe). Neptune previously made a find nearby that the company reckons could contain more than 30mmboe.

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UK Government ministers may applaud Neptune’s success after launching a drive to ‘max out’ the North Sea’s resources. This has included announcing plans to hold annual exploration licensing rounds.

The news from Neptune came with a catch, however. The find was made in the Norwegian sector of the North Sea.

It follows a run of drilling successes for firms off Norway, which has generated strong interest in the industry.

Exploration activity off the UK has fallen to record lows in recent years. The difference in activity rates can’t be blamed solely on geology. Companies have long made clear that their enthusiasm for Norway partly reflects the generosity of the support on offer there. For years companies got the bulk of their exploration costs refunded.

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The UK Government tried to encourage exploration activity by introducing a generous-looking investment allowance alongside the windfall tax it imposed last year. This will allow profitable firms to cut their tax bills but may not look as attractive as the cash refunds provided by the Norwegian authorities. While the headline tax rate is actually higher in Norway than in the UK, at 78% against 75%, it has remained in place for years. UK rates have changed several times leaving a legacy of distrust.