Matt Oliver | The Telegraph | A Labour campaigner’s oil and gas company will sell its North Sea assets after concluding Britain is no longer attractive enough for investment.
Deltic Energy, chaired by Labour election agent Mark Lappin, said it would switch to pursuing opportunities abroad due to “well-publicized political and fiscal headwinds” at home.
In a statement, the company said this would mean focusing on a handful of its most valuable UK assets while halting spending on everything.
The changes will result in a 40pc cut to Deltic’s operational spending next year, it said.
The company is the latest in a series of businesses to walk away from projects following a decision by Rachel Reeves, the Chancellor, to expand the windfall tax on oil and gas firms.
Operators have also complained of uncertainty caused by an ongoing regulatory review by the North Sea Transition Authority into how licenses are approved.
Deltic has interests in a string of North Sea projects, most notably a 25pc holding in the Selene exploration well that is being drilled by oil giant Shell off the coast of Lincolnshire.
Selene is estimated to contain about 318bn cubic feet of gas and is seen as less risky than other prospects because it is close to existing infrastructure and located in a well-understood part of the southern North Sea.
Deltic said Selene would be its main priority over the next 12 months, as it dials down spending on the other UK projects.
It comes after the company previously abandoned its licence for the Pensacola well – the largest North Sea discovery in a decade – because of “fiscal volatility and negative political rhetoric”.
The statement by Deltic on Monday said: “For the last decade, Deltic has invested in its UK portfolio and achieved material exploration success despite the well-publicised political and fiscal headwinds that have hampered the UK’s oil and gas industry in recent years.
“It is clear that, while this situation persists, the UK is not the ideal place in which to invest in new oil and gas exploration or appraisal opportunities.
“Therefore, the board has carefully considered the best way to leverage the company’s international experience and expertise to create value for shareholders going forward.”
Andrew Nunn, Deltic’s chief executive, said the company was “actively assessing a number of attractive opportunities in geographies where more supportive policies towards oil and gas development exist”.
The windfall tax, formally known as the energy profits levy, was originally imposed by the Conservatives. But Labour’s Ms Reeves has increased the headline rate from 75pc to 78pc as well as extending its duration by two years, meaning it will expire at the end of March 2030.
The Chancellor also scrapped an “unjustifiably generous” allowance that let companies deduct some of what they invested into new oil and gas fields from the total they were required to pay. That allowance will now end on Nov 1. A separate allowance for investment in green energy projects will still be deductible from the tax.
Ms Reeves’s decision to expand the windfall tax was described as “reckless, wrong and economically ruinous” by the Aberdeen & Grampian Chamber of Commerce.
The North Sea Transition Authority licence change was instigated under Ed Miliband, who took over as Energy Secretary in July.
The move followed court rulings that said proposed developments must account not only for their own direct carbon emissions but also for indirect ones that result from them, such as those created by burning natural gas extracted from a well.
