One of the North Sea’s biggest oil field developments is in jeopardy after developers put the project on hold following a crackdown by Ed Miliband.
NEO Energy on Monday announced a slowdown of investment in various UK schemes, including the large Buchan Horst redevelopment, 93 miles off the coast of Aberdeen.
Buchan is the third-biggest upcoming North Sea project and is conservatively expected to yield about 70m barrels of oil, with peak production likely to hit about 35,000 barrels per day. It was expected to begin production in 2027.
But NEO claimed a tax raid and new consultation launched by the Labour Government had plunged the scheme into uncertainty.
Rachel Reeves, the Chancellor, is working with Energy Secretary Mr Miliband to increase the windfall tax on oil and gas businesses.
Mr Miliband’s department is also reviewing the environmental assessment process for North Sea oil and gas developments in a consultation due to run until the spring.
This was announced last month in response toa landmark Supreme Court ruling which said the “scope 3” emissions – those that would indirectly result from a development, such as cars running on petrol – must be taken into account.
The ruling has already led the Department of Energy Security and Net Zero to announceit will not defend previous decisions to grant licences for the major Rosebank and Jackdaw developments in court – although these have not yet been revoked – with other North Sea operators also facing limbo while the Government decides what the ruling means for future schemes.
Sir Keir Starmer, the Prime Minister, and Mr Miliband previously vowed not to grant any new oil and gas licences if they won power in July’s election.
The review has prompted the Offshore Petroleum Regulator for Environment and Decommissioning, which handles development applications, to impose a temporary moratorium on applications that are already in motion as well, NEO Energy said.
The company said that combined with the harsher tax environment, this had implications for investment.
It added: “Against this uncertain backdrop, NEO and its owner HitecVision have taken the decision to materially slow down investment activities across all development assets in its portfolio.
“In relation to the Buchan Horst project, NEO awaits clarity regarding the UK regulatory and fiscal framework so that the full impact can be assessed.
“This will inevitably delay first oil timing in relation to the project which was previously forecast to be late 2027.”
Offshore Energy UK, which represents developers, has urged ministers to speed up the Energy Department consultation.
In a separate report published on Monday, the lobby group warned Labour’s tax raid on UK oil and gas companies would drive investment overseas and cost the country £13bn.
It said plans to further increase the windfall tax on oil and gas profits and scrap tax breaks would virtually halt all further investment into the North Sea.
New levies drawn up by Ms Reeves and Mr Miliband will result in North Sea oil and gas producers paying 78pc tax on profits from November, the highest rate of any UK industry.
Meanwhile, the landmark decision by the Supreme Court in June has dealt another blow to the industry. It ruled that emissions from burning fossil fuels must be considered when approving new drilling sites.
Greenpeace and fellow climate campaign group Uplift subsequently secured judicial reviews of oil licences already issued by regulators, including the North Sea Transition Authority, which approved Rosebank and Jackdaw and is ultimately overseen by Mr Miliband’s department.
A final decision on the licences will depend on the companies and the courts, but if the Government refuses to defend the case the environmental groups are almost certain to win.
Equinor is developing Rosebank, 60 miles west of Shetland, which contains up to 500m barrels of oil and was planned to operate until at least 2050.
Jackdaw, which would produce 40,000 barrels a day for two decades or more, is being developed by Shell.
The Government said its retrospective decision not to defend the granting of licences for the two schemes would save taxpayers’ money.
Brendan Long, director of research at investment company Zeus Capital, previously warned that Mr Miliband’s decision would put wider investment in Britain at risk.
A spokesman for Mr Miliband has been contacted for comment.
A spokesman for the Department for Energy Security and Net Zero pointed to previous comments by Michael Shanks, the Energy Minister.
He said: “This Government is committed to making Britain a clean energy superpower, helping to meet our first mission to kickstart economic growth. While we make that transition the oil and gas industry will play an important role in the economy for decades to come.
“As we support the North Sea’s clean energy future, this Government is committed to protecting current and future generations of good jobs as we do so.
“We were elected with a mandate to deliver stability, certainty and growth. Every action we take will be in pursuit of that.
“We will consult at pace on new guidance that takes into account the Supreme Court’s ruling on environmental impact assessments, to enable the industry to plan, secure jobs, and invest in our economy.”
