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Labour’s Energy Strategy Casts Shadow on North Sea Oil Ventures Ahead of Election

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Labour's planned prohibition on issuing new North Sea oil and gas licenses is causing concern among producers.

Business host @iankingsky

Thursday, June 6, 2024, 1:

If survey predictions hold true, the Labour Party is poised to take power in just under a month, but its proposed policies are already influencing the business sector.

On Wednesday, it was announced by three energy firms—Jersey Oil and Gas, Serica Energy, and Neo Energy—that the commencement of oil production at the Buchan oilfield, located 120 miles northeast of Aberdeen in the North Sea and jointly owned by them, has been postponed by a year.

The group directly connected their decision to the unexpectedly early scheduling of the election.

Discover more about Labour's introduction of its Great British Energy initiative – is it necessary?

Jersey Oil and Gas, on behalf of itself and its collaborators, informed its investors: "Efforts are ongoing to prepare the Buchan project for field development plan approval by year's end. However, the precise schedule for reaching this crucial goal and advancing the project is dependent on obtaining fiscal certainty from the upcoming government and confirming that the project is economically viable."

The primary energy initiative of the Labour

This alluded to the energy policies advocated by the Labour Party.

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The recent decision on oil and gas is a political win for the Prime Minister, though it does little to address our actual energy requirements.

In a recent announcement, Sir Keir Starmer, head of the Labour Party, unveiled plans for a 'green prosperity plan' which involves an investment of £23.7 billion throughout the next parliamentary term. Central to this initiative is the establishment of Great British Energy, a government-run entity focused on renewable energy investments.

The majority of the funding will come from increasing the windfall taxes that were initially levied on North Sea oil and gas producers by Rishi Sunak during his tenure as chancellor in 2022.

Last week, Sir Keir advocated for a comprehensive windfall tax, suggesting an increase in the overall tax rate from the existing 75% to 78%.

Ed Miliband, holding the position of shadow secretary of state for energy security and net zero, and the designer of Labour’s energy policies, also suggests eliminating the tax breaks that Mr. Sunak established, in addition to the windfall tax, which permitted producers to deduct their new production investments from their tax liabilities.

Offshore Energies UK, a sector organization, has indicated that the proposals put forward by the Labour Party might lead to a reduction of 42,000 positions in the North Sea oil and gas production workforce.

Oil and Gas Firms Alarmed by Lack of New Licenses

It seems that what truly alarmed Jersey and its associates was the Labour Party's earlier commitment to not issue any additional North Sea oil and gas permits.

If the ban is implemented, it will significantly affect projects such as Buchan, which is estimated to hold 100 million barrels of oil and was expected to start production in 2026.

Labour's plans might also jeopardize other North Sea investments, including the £900 million Buchan project.

According to today's update from Energy Voice Online, additional ventures such as Glendronach, a planned gas field west of Shetland by French giant TotalEnergies, and Avalon, an oilfield in the Outer Moray Firth being developed by Malaysian firm Ping Petroleum, might face delays similar to those experienced by Buchan.

The article also mentions that the plans by Viaro Energy, located in London, to acquire North Sea properties such as the Anning and Somerville gas fields from Australian company Hartshead Resources are experiencing postponements.

Viaro's founder and CEO, Francesco Mazzagatti, expressed to Energy Voice Online, "The recent general election and the Labour Party's commitments to stop issuing new oil and gas licenses have complicated strategic planning for North Sea investments among producers."

The Conservatives have revised the Energy Profits Levy (EPL) tax four times over a few years. Additionally, with the new proposals Labour has introduced concerning the sector, there's a notable absence of the necessary stability and foresight needed for the efficient and timely execution of projects.

"It's high time for a more practical method."

Advocacy and mobilization by political groups and

In the lead-up to the upcoming vote, both the Conservative Party and the Scottish National Party, who presently share control of all the constituencies in the Grampian area, are vigorously focusing their efforts on this matter as part of their campaign strategies.

Yet, upon taking office, this problem may rapidly evolve into a significant challenge for the new Labour administration.

Unite, the largest trade union in the UK and a key financial supporter of the party, is pressing Sir Keir to avoid prohibiting new oil and gas exploration licenses until Labour devises strategies to compensate for the potential employment impacts of such an action.

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The sector is eager for a swift resolution to gain clear direction.

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