A major North Sea project has stalled after Labour confirmed plans to increase taxes on oil and gas giants.
Chancellor Rachel Reeves confirmed on Monday that she would remove an investment allowance and add a further three percentage points to the energy profits levy which would take the headline tax rate to 78%. The end date for the charge has also been extended for a further 12 months to March 2030.
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.”