High oil and gas prices are going to drive further consolidation in the UK sector of the North, according to analysts, who also said tax considerations would play a role in stimulating M&A appetite in the region.

The expectations come from a Reuters poll among analysts and bankers, who said the oil and gas price inflation driven by the war in the Middle East has made mergers and acquisitions in the space more tempting—even in the UK’s North Sea, where the energy industry has been targeted by half a dozen successive UK governments with a growing red-tape burden and windfall profit taxes over the past decade.

As a result of that approach, many have either considerably reduced their presence in the North Sea or sold all assets. With a total tax burden of 78% on industry players, it is easy to see why companies have made the decision to leave. Shell is still present in the basin, but BP said in July it was going to sell all of its North Sea assets. Meanwhile, Shell and Equinor combined their oil and gas assets in a standalone company, Adura. TotalEnergies merged its assets with NEO NEXT to create NEO NEXT+, in which the French supermajor holds a 47.5% interest.

According to analysts, BP could get up to $2 billion for its North Sea assets and prompt more deals in the region. “Most likely the buyer is another North Sea consolidator. Value will be driven by infrastructure and tax synergies rather than by reserves alone,” Cavendish analyst James McCormack told Reuters. Among the most likely suitors, McCormack suggested NEO NEXT+, Ithaca Energy, and EnQuest.

The UK government’s recent decision to give the green light to the Jackdaw gas field could provide further motivation for M&A activity in the North Sea, as it demonstrates how energy security has topped emission reduction in terms of priorities.

“Recent events in the Middle East have triggered global energy shocks and pushed up bills for families across the country. At a time of global instability, homegrown energy can be a source of national strength,” the government said as it announced the decision earlier this month.

What I Cover Irina Slav has been writing about global energy markets since 2007, covering the oil and gas industry, energy security, commodities, and the…