North Sea oil project postponed due to uncertainty about taxes before the elections

Three oil and gas companies have postponed a decision on a new North Sea development due to uncertainty over possible tax increases under a future Labor government.

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

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

The company stated that sanctioning the development is “obviously linked to securing fiscal clarity from the next administration and ensuring that the project remains financially attractive.” Under the current tax regime, the delay has no material impact on the project's valuation. The windfall tax on oil and gas profits, which Boris Johnson introduced in 2022 in response to rising energy prices, remains a controversial issue.

Andrew Benitz, CEO of Jersey Oil and Gas, expressed hope for quick tax clarity, saying: “I am hopeful that tax clarity will come in the short term.”

Labor has proposed increasing the levy on energy profits from 75% to 78% and closing 'loopholes', sparking concerns within the sector over the possible removal of crucial investment subsidies. 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.

Ownership of the Buchan project is split between Neo (50%), Serica (30%) and Jersey Oil and Gas (20%). Following the announcement, shares in Jersey Oil and Gas fell 19.6%, from 29.3p to 120.7p, while shares in Serica Energy fell 0.8%, from 1.3p to 163.4p.

This slowdown underlines the significant impact that political and fiscal uncertainties can have on key investment decisions in the energy sector, potentially affecting future energy production and market stability.

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