North Sea firms postpone oilfield opening after early UK election called (updated)

Jersey Oil and Gas

05/06/2024 15:07

(Updates share reaction, adds no comment from UK Treasury and
Labour party in paragraph 9)
       June 5 (Reuters) - Three British energy companies have
decided to delay by a year the planned start of oil production
at their joint-venture oilfield in the North Sea, citing the
need for clarity on the fiscal policies of the next government. 
    Jersey Oil and Gas  JOG.L , which owns 20% of the Buchan
field, gave the update on Wednesday on behalf of the joint
venture partners, among them Serica Energy  SQZ.L  and
50%-stake-owning operator NEO Energy. 
    Shares in Jersey were down 18% and Serica's shares dipped
about 1.5% after the news. 
    Many North Sea oil and gas producers have been merging,
shifting overseas, and cutting investment as Britain's windfall
tax slashes profits and the opposition Labour Party threatens
more tax if it wins the next general election.
    When Serica bought its 30% stake in the Buchan field from
Jersey Oil and Gas in February, the target for first oil
production was in 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 first oil target has now moved to late 2027 after
the earlier-than-expected election date. 
    Jersey said the Buchan Field Development Plan was on course
for end-2024 approval.
    But 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 a request for comment. 
    Labour, with a strong lead in polls, has vowed to raise the
windfall tax by 3% to help fund its energy transition strategy,
which the North Sea oil industry has complained would further
deter investment.
    "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," said WH Ireland analyst Brendan Long. 
    It is the best undeveloped oilfield of its kind in the UK
North Sea in terms of scale and low risk, he added.

 (Reporting by Deep Vakil in Bengaluru; Editing by Clarence
Fernandez, Kirsten Donovan)
 ((DeepKaushik.Vakil@thomsonreuters.com;))