Deltic blames policymakers for North Sea struggle

Graham Swindells, CEO of Deltic Energy

DELTIC Energy has hit out at “fiscal uncertainty created by the current government, along with recent rhetoric emanating from the Labour Party” as they struggle to farm-out part of the oil field Pensacola.

In the southern North Sea, the field believed to contain more than 300million barrels of oil equivalent.

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But failure to find a new partner for the project could put the development of the field at risk.

In a statement, the company said: “The feedback from Deltic’s Pensacola farm-out process has indicated that the continual tinkering with the Energy Profits Levy and resultant fiscal uncertainty created by the current government, along with recent rhetoric emanating from the Labour Party, have had a severely negative effect on the ability of UK Exploration and Production (E&P) companies to commit to long term investments in the North Sea.”

It continued: “This has resulted in many operators diverting capital away from the UKCS or delaying investment decisions, especially with respect to new large-scale opportunities like Pensacola.

“Against this hostile political environment, and despite the Company’s best efforts, Deltic have not yet been able to secure a farm-out partner for Pensacola and although there are a number of live discussions with respect to a way forward on Pensacola, there is a risk that a farm-out may not be secured before the end of May 2024.

“We remain of the view that Pensacola represents an excellent value-driven opportunity for the right partner and would be willing to engage with any additional potential partners.”

Aberdeen and Grampian Chamber of Commerce policy director Ryan Crighton said: “This announcement should be deeply troubling to both those in power, and to those who seek to win power.

“Despite repeated warnings about the damage a windfall tax would cause, the UK Government, cheered on by the opposition, chose to take a gamble on the North Sea.

“The price already being paid is jobs, investment and, ultimately, our energy security.

“Enough is enough.

“The chancellor must now wake-up and recognise the corrosive impact the levy has had and scrap this job-destroying tax before it is too late.”

Commenting, Graham Swindells, CEO of Deltic Energy, said:

“The struggle to find a way forward on a project like Pensacola, which is one of the largest discoveries in the North Sea in recent decades, is a real-world consequence of our political leadership using the nationally important oil and gas industry as a political football at a time when energy security is of paramount importance.

“Given the impact of fiscal and political uncertainty on investment decisions we have seen a shift away from investment in larger standalone projects, like Pensacola, towards more affordable, lower risk opportunities which defer decommissioning or increase infrastructure life such as Selene, and the Company’s Syros prospect in the Central North Sea, where we have seen an enhanced level of interest.

“We look forward to the start of drilling operations on the high impact Selene exploration well, in which Deltic is fully carried for the estimated cost of the success case well, which remains due to spud in July 2024. In the meantime, we will continue to pursue all avenues to progress Pensacola and will update the market in due course.”

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