But first they need the UK government to urgently clarify the fiscal settings
The joint venture partners in the large Buchan oil redevelopment project in the UK North Sea have clearly defined the steps required to reach the final investment decision, but the unclear UK fiscal settings are holding them back.
The project owners are NEO Next — the merged entity between Neo Energy and Repsol UK — Serica Energy and Jersey Oil & Gas.
The Buchan project was poised for project sanction in 2024 until the UK government derailed Buchan and many other planned UK North Sea investments with its proposed fiscal and regulatory policy changes.
Jersey on Thursday said that clarity has been obtained on the environmental guidelines for new oil and gas developments, but the conclusions of the fiscal and licensing settings remain outstanding.
“Most significantly, it is the outcome of the fiscal consultation that will dictate the ability of the joint venture to progress Buchan towards project sanction and FDP (field development plan) approval,” said Jersey.
Once satisfactory clarity is obtained from the government, there are clear steps required to move Buchan forward to FDP approval and into the development execution phase.
These are:
- Reactivation and completion of the contract tender process for the main drilling, subsea and FPSO modification workscopes;
- Recontracting of the floating production, storage and offloading vessel Western Isles;
- Submission to the UK regulator of an updated environmental impact assessment report that includes Scope 3 emission forecasts for the project; and
- Joint venture finalisation of the FDP and approval of the regulator.
Andrew Benitz, chief executive of Jersey, said: “Against a challenging backdrop where the North Sea oil and gas industry has been unnecessarily damaged by the 78% EPL tax rate, we have positioned the company to withstand the ongoing fiscal and regulatory uncertainty by halving the cost base and maintaining a strong cash position.
“We hold an interest in a potentially incredible prize in the form of our carried interest to first oil on the Buchan redevelopment project. This has the potential to unlock significant UK investment, create over 1000 well paid jobs and ultimately realise hundreds of millions in future tax payments to the exchequer.”
He added: “We urge the government to complete its consultation process on the future fiscal regime and remove the EPL in order to establish a playing field that facilitates future investments.
“Homegrown energy should be prioritised over more carbon intensive energy imports and, with Buchan, we have a great opportunity to be at the forefront of championing a fully integrated production hub that aligns with the industry’s decarbonisation strategy.”
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