Jersey Oil and Gas, Serica Energy, and Neo Energy have postponed the £900 million Buchan project, initially slated for production in 2026, to late 2027, citing fiscal uncertainty tied to the upcoming general election on 4th July.
The Buchan project, one of the largest undertakings in the North Sea, aims to produce approximately 35,000 barrels of oil equivalent per day at its peak. However, the unexpected timing of the general election has led to the deferral of the final investment decision to later this year. Consequently, first production is now delayed until late 2027.
London-listed Jersey Oil and Gas, redeveloping the oilfield in collaboration with Serica Energy and Neo Energy, emphasised that securing fiscal clarity from the next government is paramount to ensuring the project’s financial attractiveness. The company noted that under the current tax regime, the delay would 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. The Labour Party has proposed increasing the energy profits levy from 75% to 78% and closing loopholes, causing concerns about the potential elimination of critical investment allowances.
Andrew Benitz, CEO of Jersey Oil and Gas, expressed optimism for swift fiscal clarity, stating, “I am hopeful that fiscal clarity will be forthcoming in short order.” However, the uncertainty has already had tangible effects.
Offshore Energy UK, the industry body representing energy companies, has highlighted the uncertainty’s impact on investment decisions. 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 ownership of the Buchan project is divided among Neo (50%), Serica (30%), and Jersey Oil and Gas (20%). Following the announcement of the delay, shares in Jersey Oil and Gas fell by 19.6%, while Serica Energy shares declined by 0.8%. This underscores the significant impact political and fiscal uncertainties can have on major investment decisions in the energy sector.
The potential for increased taxes and reduced investment allowances raises concerns about future energy production and market stability, highlighting how political developments can directly affect industry dynamics.
This delay of the Buchan project underscores the critical influence of political and fiscal certainty on large-scale energy investments. The ramifications for future energy production and market stability remain significant.
