Serica warns that the energy profits tax could hinder North Sea projects

The head of a large North Sea oil producer warned that an “punitive tax regime” would hinder its plans to further invest in Britain.

Chris Cox confirmed, as well, that Serica Energy was also looking to acquire companies outside of the North Sea.

Amjad Bseisu of Enquest said last week that the Energy (Oil and Gas) Profits Levy put billions in pounds of spending plans at risk . Cox, who is 63 years old, expressed the same concern, while noting that Serica spent around £1 billion in the UK supply chain during the last five years.

Energy profits levy introduced by Boris Johnson and expanded during Rishi Sunak’s time in Downing Street. Rachel Reeves is the chancellor and she will raise the headline rate of the levy by three percentages points, to 78 percent, as well as extend its application period by 12 months, until March 2030. She will provide more details on areas like capital allowances when she presents her first budget, which is scheduled for October 30.

Cox also cited a recent Supreme Court ruling as another area that needed more clarification. In the case of R. (Finch)v Surrey County Council, the court ruled that regulators should consider the effects of burning the oil and gas from the fields when assessing the environmental impact of new projects.

Cox said that the Buchan Project could be affected. Serica, along with Neo Energy, Jersey Oil & Gas and Jersey Oil & Gas are involved in this project. The consortium has already delayed a final decision on investment until it is more certain about the fiscal and regulation regime.

Chris Cox claims Serica spent around £1billion on the UK supply chain

Cox stated that maintaining full capital allowances and a stable financial background were “crucial” for the future of domestic investment in the oil and gas industry. These investments are not only needed for new fields but also for extending the life of existing operations. They are vital for the companies in the supply chain throughout the UK.

Serica has invested over a billion pounds into the UK supply chain in the last five year and similar expenditures would be lost if the tax regime made future investment uneconomic. Investments sustain production, increase government tax revenue and support the ability of North Sea companies to contribute to the UK’s transition towards energy. They also limit global emissions because they reduce the need for high-carbon imports.

Serica’s first-half results for this year showed a drop of 11 percent in production, which is equivalent to 43 700 barrels of crude oil per day. Due to unscheduled maintenance on its Triton hub, the full-year results are likely to be lower than forecasts of between 41,000 and 46 000 barrels per day.

The drop in gas prices and production led to a decrease of $462 millions from the previous $545 million. Pre-tax profits were $188.5 million compared to $267.9 millions previously.

Serica’s tax bill was $106 million, compared to $169 million for the first half 2023. The interim dividend from January to June of this year was 9p. Serica is also considering moving away from Aim to London’s main stock exchange.

Cox confirmed Serica’s interest in North Sea deals but stated that the company was “screening options” in other geographic areas. We haven’t given up on UK, I want to make it clear. There may be attractive growth opportunities depending on the fiscal system.

Cox said that Serica is still talking to the government about taxation, and Cox added “We’re still working hard on it.” We lobby, work with peers in the industry, industry associations and unions. “We are doing all we can to ensure a fair outcome for tax.”

Serica Energy shares closed at 114 3/4p, down 2 1/4p or 2 percent.