US oil giant pulls out of North Sea following industry meeting with Hunt

Chevron, the US oil giant, has announced that it will leave the North Sea after more than 55 years. This announcement comes just a day after Jeremy Hunt rejected industry requests for support in a private meeting.

Chevron announced that it was leaving the region after a review of its global operations. The company wanted to know “whether assets were strategic and competitive in terms of future capital”. The company said that this decision was not related to Britain’s tax system.

The announcement came after Mr Hunt had rejected requests for a reprieve from the windfall tax, which has pushed up the oil profit tax to 75pc.

Industry leaders have told Mr Hunt there is “one last opportunity” to stop a “catastrophic decline” in investment in UK waters that could reduce oil and gas production by 50pc or more by 2030.

The Chancellor has not made any promises about changing his approach. He has said that Labour’s threats to raise the windfall tax another 3pc, and to reduce investment allowances if they win the elections, are the main deterrent for investors.

Most of the North Sea’s major operators attended, including Shell Energy, BP and Ithaca Energy.

Offshore Energies UK, the industry’s representative body, briefed Chevron on the results. The company said the timing was coincidental.

A spokesperson said: “Chevron’s announcement does not relate to recent announcements regarding the UK windfall taxes. The announcement is about assessing the global portfolio which provides the best return to shareholders.

Chevron, the third largest oil company in the world, is still one of the major players in the North Sea. Exxon will leave in 2021, and other companies like Shell and BP are selling off their assets.

The company will sell its 19.4pc share in the Clair Field. This field is located 50 miles off of the coast of Shetland, and is one of the largest offshore oil fields in UK waters. It is estimated to contain eight billion barrels worth of oil spread over 85 square mile.

The company will also sell its associated assets, including the Ninian Pipeline, the Shetland Islands regional gas export pipeline and interests in the Sullom Voe Terminal.

Once a buyer has been found, the deal should raise between $800m and $1bn.

Chevron, one of the first oil companies in the North Sea to drill in 1960, has now pulled out from exploration and production following the sale of its drilling assets in 2019

The North Sea’s oil and gas production is already declining, analysts say. This is because the largest fields have already been drained. Finding and extracting the remaining reserves is therefore becoming more costly.

The industry is warned that adding extra taxes will deter investment. Harbour Energy, UK’s largest oil and gas company, has already stopped all North Sea investments.

Chris Wheaton, a Stifel analyst, published on Wednesday a new report about the prospects of the North Sea entitled “Will you please turn out the lights the last energy company that leaves the North Sea?”

The report warned that windfall tax increases could accelerate the decline in North Sea oil production, resulting in a 70pc drop by 2030. This would make the country more dependent on imports.

He criticised the windfall tax and Labour’s plans for it to be increased, saying: “Loss in investment means loss of skills and jobs for the energy transformation.”

Mr Wheaton said that 100,000 of the 200,000 industry-related jobs could disappear by 2029. The UK will import 80pc before the end of the decade.

A government spokesperson said: “Nobody supports the oil and gas sector more than the Government.” Our annual licensing rounds support around 200,000 jobs. They give them the certainty to invest, and unlock billions of tax dollars for our own transition towards clean energy.

The temporary windfall tax on Oil and Gas firms encourages investment, which creates jobs and grows the economy. The more they invest the less they pay in tax.