North Sea Firms Postpone Oilfield Opening after Early UK Election Called

North Sea Firms Postpone Oilfield Opening after Early UK Election Called.jpg

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, which owns 20% of the Buchan field, gave the update on Wednesday on behalf of the joint venture partners, among them Serica Energy 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.

(Reuters - Reporting by Deep Vakil in Bengaluru; Editing by Clarence Fernandez, Kirsten Donovan)

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