North Sea oil operators delay projects due to election uncertainty
Viaro, TotalEnergies and Ping Petroleum have all been tipped to slow progress on UK projects due to political uncertainty. By Ryan Duff This comes as Jersey Oil and Gas announced delays to first oil at its Buchan redevelopment.
An industry expert, who wishes to remain anonymous, tipped that other projects, including TotalEnergies’ Glendronach and Ping Petroleum’s Avalon, could follow suit.
Most companies have slowed down in terms of making final investment decisions, the expert explained.
The consensus as to why this may be the case was the political uncertainty that has been troubling the UK’s oil and gas industry.
As Labour is polled to win the next general election, concern has been raised regarding the party’s previous pledge to grant no new North Sea oil and gas licences.
This particularly impacts the Buchan redevelopment as the trio of firms aim to submit a field development plan to the North Sea Transition Authority.
The industry expert said that there may be concern that approval would not come before a Labour government is formed.
Labour has been asked for comment.
Buchan is not the only project facing delays as the UK sector battles against political turbulence.
The timeline for Viaro’s takeover of a series of Hartshead Resources UK oil fields has slipped.
Under this £105 million deal, Viaro is becoming 60% owner of Licence P2607 which contains the Anning and Somerville fields, as well as the Hodgkin and Lovelace plays.
At the time of the deal’s announcement, the Australia-headquartered Hartshead said it will retain operatorship for now, and transfer control to Viaro “at a mutually agreed future date”.
Viaro chief executive Francesco Mazzagatti’s said: “The general election and Labour pledges around no new oil and gas licences are making it very challenging for producers to approach North Sea investments strategically.
“With the four changes that the Conservatives made to the EPL tax in a couple of years, and with Labour’s announced plans around the sector, there is a distinct lack of plannability and predictability that are required to carry out projects successfully and without delays.”
‘A more common sense approach is long overdue’
Mr Mazzagatti added that “it is true” that the Anning and Somerville fields are “now on pause because of this, after a smooth and speedy process throughout 2023.”
“On our end, we worked with our partner to remain on track with the development and planned in contingencies around the imposed challenges, but the direction in which the sector has been going in 2024 has been beyond what we were able to plan for.”
He also said that despite “an increasing global trend of supermajor mergers” the UK stands to miss out on these deals as firms shy away from committing to the country’s politically unstable regime.
Mr Mazzagatti concluded: “This does leave room for independent producers to grow, but only if the volatile investment environment is allowed to stabilise and the stance on oil and gas licences is revisited, which we hope to see in the aftermath of the elections.
“I like to try and see opportunity in a crisis, as they are bound to end eventually, but the moment for the UK to take a more common sense approach is long overdue if it is to remain a competitive global economy.”
Jersey shared: “While activities continue in order for the Buchan project to be ready for Field Development Plan approval by the end of this year, 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.”
Viaro and the Buchan redevelopment partners are not the only firms being hit with the repercussions of political turmoil.
TotalEnergies’ Glendronach and Ping Petroleum’s Avalon were also mentioned by the industry commentator.
Late last year Kistos shared that “adverse changes” in the UK fiscal environment led to TotalEnergies’ Edradour West, rather than Glendronach, getting the go ahead.
Around the time of the announcement, TotalEnergies said that was “challenging” to commit due to the current fiscal regime – namely the windfall tax.
In September the French supermajor’s UK managing director Nicolas Payer said: “The current cost environment and the lack of predictability on fiscal terms are making it challenging for final investment decisions to be taken, particularly in relation to drilling and subsea work in the harsh environmental conditions West of Shetland.”
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