Jersey Oil and Gas has said continued uncertainty around UK government policy is slowing down work on its Greater Buchan Area redevelopment project in the North Sea.
Jersey holds a 20% interest in the project, which will use the Western Isles FPSO, alongside operator NEO Energy (50%) and Serica Energy (30%).
NEO warned in September last year that it would “slow down investment” in the UK ahead of changes to the windfall tax on oil and gas firms.
Similarly, Jersey said the Buchan environmental impact assessment approval process has “naturally been paused” by environmental regulator OPRED following the decision in the Finch Supreme Court case last year.
As a result of the slow down in activity, Jersey said Buchan operator NEO remains in discussions with Western Isles owner Dana Petroleum over a deal to purchase the vessel after delays to modification work.
“In light of the current slowdown in Buchan project activities as a consequence of the fiscal and regulatory consultations, along with work on the vessel still requiring completion, the parties have not terminated the agreement and are in dialogue on the optimal contractual way forward to accommodate these delays,” Jersey said.
In light of the slow down in activity, Jersey said the Buchan licensees applied for an extension from the North Sea Transition Authority (NSTA) regulator, which has now been granted.
The Buchan partners will now have until 28 February 2027 to finalise a field development plan for the project.
With the UK government set to launch a consultation on the future of the North Sea fiscal regime, Jersey said “satisfactory clarity” is required for sanctioning of the Buchan project.
Elsewhere, Jersey said it is actively evaluating opportunities for “a number of potential UK producing asset acquisitions”.
‘Uncertain backdrop’ for North Sea firms
Jersey chief executive Andrew Benitz said the extension of the Buchan licence means the joint venture partners have “secured the necessary time to determine the appropriate path to project sanction”.
“Whilst the UK government’s fiscal and regulatory consultations are creating a somewhat uncertain backdrop for the industry at the current time, the way forward on these two key areas is scheduled to be resolved over the coming months,” Benitz said.
“The Buchan project has the potential to create over 1,000 jobs across many parts of the UK’s supply chain and over 200 project related jobs, attract private investment of around £1 billion into the UK economy and generate hundreds of millions in UK tax revenues.”
North Sea in ‘holding pattern’, BP says
It comes after a BP executive told a Westminster committee last week that North Sea firms are in a “holding pattern” and delaying investment as they wait for policy clarity.
Appearing before the Scottish Affairs committee, BP senior vice president for Europe and the UK Louise Kingham told MPs that there is “a lot of economic opportunity for Scotland” remaining in the basin.
However, Kingham said “investment has definitely slowed right down” in the North Sea due to continued uncertainty around consenting for major projects.
It comes after approvals for major Equinor and Shell projects were overturned by a Scottish appeals court earlier this year.
The North Sea operators will need to resubmit consent applications for the Rosebank and Jackdaw developments following a Supreme Court ruling on downstream emissions.
Since then, Kingham said North Sea operators like BP have been in a “holding pattern” as they await certainty from the UK government.
“If we can get that kind of certainty and stability back into the system in the UK in terms of the policy and regulatory framework, then we can look at the economics of investing,” she said.
“We cannot invest until we have certainty around that framework and feel confident that it’s a good use of investors’ money.”
Meanwhile, Harbour Energy vice president for global government relations Hebe Trotter told the committee the company could see further job losses without policy certainty.
“We could double our oil and gas recovery, but also add £200 billion worth to economic value to the UK, and most of that in Scotland,” Trotter said.
“So there is a huge upside [but] I think the reality is [Kingham and I] work for international companies, we have to compete for capital and we have to compete for capital from within our own business as well.
“There are plenty of other countries that we operate in that have a more favourable fiscal environment and every pound that is decided not to be spent here in the UK is essentially fewer jobs, less money in terms of tax receipts to the exchequer, but critically lower investment, meaning less growth and less economic value for Scotland.”
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