I think
@sergeant is spot on. This announcement needed to fit the commentary that projects will not proceed under Labour Policy. Horrible announcement for us but it needed to be done to apply some pressure back on Labour. The pushback from the industry is starting to wind up.
Clearly HHR are in difficult position right now. Until the taxation issues are resolved the project can't proceed.
IMO though I don't think RR will walk away from the JV and would be viewing this project as deferred rather than abandoned for a few reasons.
- RR are still spending. They spent $89m in December to secure 15% of the Bressay field and attached FPSO. They spent an unknown amount in February acquiring the other 50% of the West of Shetland assets. (they already own the other half)
- the farmout deal with HHR is back end loaded. RR have only paid $12m to HHR to gain control of a 480BCF resource (inc. 180BCF 2P) They have no more payments until the JV is spending capex. (the original $40m bonus on FID/FDP being converted to free carry in December)
- The West of Shetland work program also hints at how RR may approach our project. The are planning first gas for 2028 after the current EPL ends. So while they will receive no Investment Allowance on capex they also won't have to pay the Windfall Tax. If the government decides to extend the EPL IMO RR will just defer first gas until the new end date.
I am not interested in or trying to pump HHR. As
@aero39 said so well "we are all in this together". I'm just expressing a view that having RR as a partner is to HHR's benefit and that the JV structure means that it is not prohibitive for RR to remain in the JV. I hope that they do and that some progress is made on the politics soon.
