Three oil and natural gas companies delayed making a decision about a new project in the North Sea, due to uncertainty regarding whether a possible Labour government would increase windfall tax penalties.
The Buchan project, worth £900 million, was expected to produce its first oil by 2026 and about 35,000 barrels equivalent of oil per day at its maximum.
The London-listed Jersey Oil and Gas which is redeveloping this oilfield along with Serica Energy and Neo Energy has stated that an earlier general election than expected has caused them to delay a final decision on investment until later in the year. This also delays the first production until 2027.
The company stated that sanctioning the development “was naturally linked to securing financial clarity from the new government and ensuring the project remains economically attractive”.
The fact that the first production date is later does not affect the value of the project under the current tax regime. Boris Johnson introduced the windfall tax in 2022 to combat soaring energy costs.
Andrew Benitz, chief executive of Jersey Oil and Gas said that he hoped “that fiscal clarity would be forthcoming in a short time”.
Labour said that it would increase the energy profits tax from 75% to 78.5% and “close loopholes”, Offshore Energy UK said. This had caused uncertainty for energy companies, who were afraid the party might remove “critical” investments allowances.
Neo owns 50% of the Buchan project. Serica holds 30% and Jersey Oil and Gas 20%.
David Latin, Serica’s chairman and interim chief Executive, stated: “The current uncertainty makes investment decisions difficult.”
Neo refused to comment.
Shares of Jersey Oil and Gas dropped 29.3p or 19.6 percent to 120.7p and Serica Energy fell 1.3p or 0.8 percent to 163.4p.
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