Operators postpone North Sea oilfield production due to early election date

Labour has vowed to raise the industry's windfall tax by 3 per cent to help fund energy transition

Buchan has been described as the best remaining oilfield in British waters in terms of scale and low risk. Alamy
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Three British companies have delayed the start of production in what has been described as the “best remaining oilfield in UK waters”, citing the need for clarity on the fiscal plans of the next government.

Jersey Oil and Gas, which owns 20 per cent of the Buchan field, made the announcement on behalf of joint venture partners Serica Energy and 50 per cent-stake-owning operator NEO Energy.

Labour, which has a strong lead in polls ahead of the general election on July 4, has vowed to raise the industry's windfall tax by 3 per cent to help fund its energy transition strategy.

It has also pledged to halt the issue of new licences for exploration and drilling and remove tax breaks which allow operators to offset profits against investment in new fields. But it will not revoke existing licences.

Many North Sea oil and gas producers have been merging, shifting overseas and cutting investment since Britain raised its windfall tax in 2022 in the wake of soaring energy prices as a result of Russia's invasion of Ukraine.

The North Sea oil industry has said Labour's future plans would further deter investment.

When Serica bought its 30 per cent stake in the Buchan field from Jersey Oil and Gas in February, the target for initial production was the fourth quarter of 2026.

That was before last month's call by British Prime Minister Rishi Sunak for a general election on July 4.

Jersey said on Wednesday the production target had now moved to late 2027 after the earlier-than-expected election date.

Jersey said the Buchan Field Development Plan was on course for end-of-2024 approval.

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It added: "The exact timing for achieving this key milestone and enabling project sanction is naturally linked to securing fiscal clarity from the next government and ensuring that the project remains financially attractive."

The UK Treasury department declined to comment due to pre-election guidance. The Labour Party did not immediately respond to a request for comment.

WH Ireland analyst Brendan Long said Buchan is the "best remaining" oilfield in British waters in terms of scale and low risk.

"We anticipate the UK government will provide fiscal clarity such that the operator of the Buchan redevelopment will have sufficient confidence in the fiscal regime to progress with project sanction," he added.

Shares in Jersey were down 18 per cent and Serica's shares dipped about 1.5 per cent after the news.

In November, the Conservative-run government set out plans to boost oil and gas production through a new system of annual licensing.

Updated: June 06, 2024, 3:23 PM