A MAJOR project in the North Sea has stalled following the Labour Party’s announcement of plans to hike taxes on major oil and gas companies.
On Monday, Chancellor Rachel Reeves announced that she would eliminate a tax investment incentive and increase the energy profits tax by an additional three percentage points, raising the overall tax rate to 78%. Furthermore, the deadline for this tax has been pushed back by another year, until March 2030.
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Yesterday, Jersey Oil & Gas extended its pause on the £900 million Greater Buchan Area project it is jointly undertaking with NEO Energy and Serica.
The firm said it would “carefully consider the impact of the tax changes to the economics of the development and project sanction” and would not be able to make a final decision until after the budget.
Ashley Kelty, an analyst from Panmure Liberum, the investment bank, said that the UK government’s policy would “hasten the demise of the UK North Sea”. He said that the plans were “utter economic insanity” and would raise only a fraction of the amount promised by Reeves.
“The irony is that this policy will mean that the ‘hard-working people’ of the UK will face both higher energy bills and taxes to pay for the expensive renewables promised and the vast amounts of imported fuels needed, while also increasing the risk of blackouts and fuel shortages,” he said.
Andrew Bowie, the shadow energy minister and Conservative MP for West Aberdeenshire & Kincardine, urged Reeves to reverse her plans, arguing that they threatened the UK’s energy security and tens of thousands of jobs.
“Labour were warned that their reckless and economically illiterate position on oil and gas would devastate the industry,” he said. “We are quickly seeing the impact of Labour policy on North Sea energy.”
Stephen Flynn, the SNP leader at Westminster, has invited Reeves and Ed Miliband, the energy secretary, to Aberdeen to explain why they believe “they are right and the energy industry experts are wrong” on job losses.
“If this (the Jersey Oil & Gas announcement) is a glimpse into the future under this Labour government then it is one that will cause alarm bells to ring across the North-east of Scotland.
“We badly need a plan that drives industry to use their skills to help us deliver an energy transition, not one that drives them out the door.”
