Serica joins Enquest to warn of windfall tax threat

Another oil and gas producer has said it will halt investment in the North Sea unless Chancellor Rachel Reeves reverses her tax increases on the industry.

Serica Energy, which accounts for 5% of the UK’s gas production and has 1,000 employees, warned that new investments may no longer be feasible if Labour goes ahead with planned changes.

North Sea oil and gas production is currently taxed at a headline rate of 75%, which includes a 35% cent energy profits levy introduced two years ago in response to soaring energy prices.

Labour has vowed to hike the EPL to 38%, extend its lifetime to the end of this parliament, and remove investment allowances granting tax relief for extraction activities.

Serica CEO Chris Cox says this move could jeopardise the development of the Buchan Horst project, which is considered one of the UK’s most promising remaining gas and oil fields.

Last week Amjad Bseisu, who is CEO of Enquest, said the windfall tax is causing “irreversible damage” to the sector and forcing his business to reduce investment in the North Sea.

In his first set of results as Serica CEO, Mr Cox said its producing assets remain cash generative ‘despite an unjustifiably punitive fiscal regime that may make future investment on the UKCS challenging”.

He adds: “The outcome of the Autumn Budget regarding capital allowances is crucial for future projects such as Buchan Horst and various infill wells.

“Maintaining full capital investment allowances and replacing the energy profits levy with a long-term, sustainable fiscal regime by 2030 is essential for continued investment in the domestic oil and gas sector.

“These investments are vital not only for new fields but also for extending the life of current operations, supporting companies across the UK supply chain.

“Serica has invested over £1 billion in the UK supply chain over the past five years. Future expenditures of this magnitude will be at risk if the tax regime renders further investment economically unfeasible.”

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