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NEO owns 50% of, and operates, the Buchan Horst development project. Serica Energy and Jersey Oil & Gas are the joint venture partners, owning 30% and 20% respectively. In recent weeks the government has announced a number of measures which have materially increased the level of uncertainty in relation to the UK’s oil and gas sector and investment decisions in this context are extremely challenging.
On 29 August 2024, the Department of Energy Security and Net Zero (DESNZ) announced that, in light of the Finch Supreme Court ruling, it plans to begin a consultation with industry on new environmental guidance in relation to oil and gas projects. This consultation is not expected to conclude until Spring 2025. Consequently, the Offshore Petroleum Regulator for Environment and Decommissioning (OPRED) has further announced that while the consultation is ongoing, they will be deferring assessment of all environmental statements, including ones already in progress, such as the Buchan Horst project.
This follows the announcement on 29 July 2024 that the government intends to increase the Energy Profits Levy (“EPL”) to 38%, thereby increasing the marginal tax rate to 78%, to extend the EPL sunset date to 31 March 2030, to remove Investment Allowances and the intention to reduce Capital Allowances with the extent to be determined after industry consultation. In addition, the government wishes to consult on changes to the fiscal regime beyond 31 March 2030. These changes clearly have a negative impact on the economics and overall viability of a project such as the Buchan Horst.
Against this uncertain backdrop, NEO and its 100% owner HitecVision, have taken the decision to materially slow down investment activities across all development assets in its portfolio.
In relation to the Buchan Horst project, NEO awaits clarity regarding the UK regulatory and fiscal framework so that the full impact can be assessed. This will inevitably delay first oil timing in relation to the project which was previously forecast to be late 2027. The Joint Venture will seek a licence extension in order to continue technical evaluation in light of these changes to tax and environmental consents.
