North Sea Oil Project Delayed Amid Windfall Tax Uncertainty Before Election

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Three oil and gas companies have postponed a decision on a new North Sea development due to uncertainty over potential windfall tax increases under a prospective Labour government.

Jersey Oil and Gas, Serica Energy, and Neo Energy have delayed the £900 million Buchan project, which was expected to begin production in 2026, until after the general election on 4th July.

The Buchan project, one of the largest developments in the North Sea, aims to produce approximately 35,000 barrels of oil equivalent per day at its peak. However, London-listed Jersey Oil and Gas, which is redeveloping the oilfield along with Serica Energy and Neo Energy, has announced that the unexpected timing of the general election has pushed back the final investment decision to later this year. Consequently, first production is now delayed until late 2027.

The company stated that sanctioning the development is “naturally linked to securing fiscal clarity from the next government and ensuring that the project remains financially attractive.” Under the current tax regime, the delay does not materially affect the project’s valuation. The windfall tax on oil and gas profits, introduced by Boris Johnson in 2022 in response to soaring energy prices, remains a contentious issue.

Andrew Benitz, CEO of Jersey Oil and Gas, expressed hope for swift fiscal clarity, saying, “I am hopeful that fiscal clarity will be forthcoming in short order.”

Labour has proposed increasing the energy profits levy from 75% to 78% and closing “loopholes,” leading to concerns within the industry about the potential removal of critical investment allowances. Offshore Energy UK, the industry body, has highlighted the resulting uncertainty among energy companies.

David Latin, chairman and interim CEO of Serica Energy, commented, “The current uncertain environment makes investment decisions difficult.” Neo Energy declined to comment on the matter.

The Buchan project ownership is divided among Neo (50%), Serica (30%), and Jersey Oil and Gas (20%). Following the announcement, shares in Jersey Oil and Gas dropped by 19.6%, falling 29.3p to 120.7p, while Serica Energy shares declined by 0.8%, dropping 1.3p to 163.4p.

This delay underscores the significant impact political and fiscal uncertainties can have on major investment decisions in the energy sector, potentially affecting future energy production and market stability.

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