Wood Mackenzie: North Sea upstream investment fall while production remains flat

North Sea upstream investment will fall to around US$26 billion in 2026, but North Sea production is expected to remain flat—around 5.3 MMboe/d.

The 10% year-on-year decline in spending is part of a recent North Sea outlook by Wood Mackenzie that notes the capital discipline plans are in part due to companies’ plans for lower oil and gas prices, but more significant drivers in the decline are the “tough fiscal and regulatory policy in the UK, the unwinding of Norway's current investment cycle, and lack of opportunities in Denmark,” the firm said.

“The North Sea faces a period of stark divergence between Norway's sustained momentum and the UK's deepest downturn in decades,” said Gail Anderson, research director, North Sea Upstream, Wood Mackenzie. “Norway's focus on accelerating project timelines and maintaining gas supply will be critical for European energy security. Meanwhile, the UK's newly consolidated landscape creates potential for recovery, but only if regulatory clarity fully returns to unlock deferred investment.”

With the forecast, Wood Mackenzie identified five North Sea upstream themes for the year.

Declining investment, Norway development momentum 

Norway's development spend will remain around US$20 billion as the largest developments continue and investment in producing fields remains robust, according to the report. Spending will be down, and development unit costs will remain high in the current term. To maintain supply and delay decommissioning, Wood Mackenzie said, companies will need to cut the time from discovery to production, which will likely result in “more coordinated developments of subsea tiebacks,” the company said.

Two notable projects: Kjøttkake as DNO and Aker BP expect production 3 years after discovery, with a final investment decision expected this year, and Equinor is expected to progress the Ringvei Vest project.

UK upstream investment could fall to less than US$3.5 billion, the lowest level in real terms since the early 1970s, Wood Mackenzie said. There have been no sanctioned projects since mid-2024, and the firm expects to major final investment decisions for the second year running.

Steady supply, balanced risks

As noted above, North Sea production will average 5.3 MMboe/d in 2026, keeping supply at similar levels since 2021. Norway will keep plateau at around 4.1 MMboe/d. Gas supply to Europe remains a top priority. New and recent projects will contribute 500,000 boe/d (12.5% of total production), Wood Mackenzie said, noting Equinor's Johan Castberg and Var Energi's Balder redevelopment will account for over 50% of the new volume. Norway will bring six new start-ups online, the largest being Equinor's 136-MMboe Irpa gas field.

The UK could produce over 1 MMboe/d for the last time in 2026, Wood Mackenzie predicts. New investment at Captain and Clair will boost output while Murlach, Penguins, and Victory ramp up. Adura's 72 MMboe Jackdaw project will be the UK's biggest start-up, contingent on government environmental approval.

Consolidation

The UK market is shifting toward more transformative M&A as companies reassess their direction after the recent budget. Adura, NEO NEXT+, and Ithaca Energy are expected to keep consolidating, with the NEO NEXT–TotalEnergies UK merger marking the latest major deal. Apache, Chevron, and CNOOC remain the most likely exit candidates amid the UK's struggle to attract capital.

Aside from DNO’s US$1.6 billion purchase of Sval Energi, major deals have slowed over the past two years in Norway, and asset swaps have become the preferred way for companies to streamline portfolios and pursue incremental production or pre‑FID options.

Norway dominates North Sea exploration, appraisal

Norway continues to lead North Sea exploration, with more than 30 exploration wells planned for 2026 targeting nearly 1.3 billion boe of prospective resources. Activity will concentrate in the Northern North Sea and Mid Norway basins, with Equinor’s Vikingskipet and Arkenstone as key prospects.

Appraisal drilling could unlock over 1.5 tcf of gas supply. Afrodite, Carmen, and Norma discoveries could form a cluster development in the Northern North Sea. Meanwhile, there were no wells drilled on the UK Continental Shelf last year, the first time since the early 1960s.

UK fiscal changes, Norway Scope 3 clarity

The current year should be more fiscally stable for the UK, Wood Macenzie said, noting years of prior upheaval as there is improved clarity on the fiscal system and potential upside for operators. The Energy Profits Levy could end sooner if gas prices drop below 59 pence per therm for two consecutive quarters, triggering a less onerous windfall mechanism, Wood Makenzie said.

Norway will issue new Scope 3 reporting guidance following a legal ruling that overturned approvals for the Breidablikk, Tyrving, and Yggdrasil fields, requiring resubmitted assessments. These updates will likely influence future project approvals, though the overall risk to Norway’s ambitions remains low, currently, Wood Mackenzie said.