Tuesday, June 25, 2024

North Sea company run by Labour campaigner abandons project because of ‘negative political rhetoric’

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An oil and gas company run by a Labour campaigner has blamed “negative political rhetoric” for its decision to abandon work on one of the most significant discoveries in the North Sea.

Deltic Energy on Tuesday blamed “deteriorating sentiment towards the oil and gas industry as a result of ongoing fiscal volatility and negative political rhetoric in the run-up to the July election” for its decision to walk away from the Pensacola field.

It comes as Labour threatens to raise the windfall tax on the oil and gas industry and ban new drilling in the North Sea.

The proposals have already prompted several other operators to walk away from projects. Jersey Oil and Gas last week told investors that the work on the Buchan field will be postponed for at least a year because of the political uncertainties.

In April, Harbour Energy, the North Sea’s biggest producer, said it would cut a fifth of its workforce because of the windfall tax.

Mark Lappin, Deltic’s chairman, is Labour’s election agent for West Aberdeenshire and Kincardine, according to The Times.

However, the company has been critical of Labour’s North Sea policy. In April, Deltic hit out at 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”.

In a recent LinkedIn post, Mr Lappin said the UK’s oil and gas industry was being “treated like a political football” in the election campaign.

Pensacola is estimated to contain around 99 million barrels of oil equivalent and is one of the largest discoveries in the North Sea of the last decade.

Deltic said it had been unable to secure backing or financing for a Pensacola appraisal well.

Pensacola is a joint venture with Shell and Dutch company One-Dyas and Deltic said it would withdraw from the project and transfer its interest to the company’s partners.

It warned: “It is expected that Deltic may be required to honour certain expenditure in relation to the appraisal well.” The sum may be “material”, it added.

Shares in the company, which is listed on the Alternative Investment Market, plunged 17.9pc on the update.

Graham Swindells, chief executive of Deltic, said: “Recent history in relation to large scale discoveries such as Cambo and Rosebank has demonstrated the difficulties associated with progressing major offshore developments on the UKCS [UK continental shelf] as damaging political rhetoric and fiscal instability continue to undermine the sector.

“Although we have been unable to secure Deltic’s future involvement in the Pensacola project, it does not detract from the achievements of the team in identifying the opportunity, attracting a partner like Shell and raising the necessary capital to drill the initial discovery well.”

Two years ago the Government imposed a levy on oil and gas producers’ profits. The tax has since been raised to a current level of 75pc, including corporation tax. Labour wants to increase this to 78pc.

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