North Sea heavyweights have shown they see plenty of potential in the area in spite of continued alarm about the impact of the windfall tax.
Chancellor Jeremy Hunt caused disappointment last week as he delivered his Autumn Statement after deciding to leave the windfall tax in place following repeated warnings the levy will prompt firms to slash investment in the area.
In response to the statement, industry body OEUK reiterated calls for a cut in the 75% headline rate and said fiscal reforms were required to encourage all forms of energy investment.
However, leading firms showed yesterday that they are confident of generating good returns on investment in North Sea projects under existing arrangements.
READ MORE: 'Despicable' oil and gas licences show Big Oil interest in North Sea
Harbour Energy said it had made progress with a range of UK projects that it expects will deliver a boost to earnings.
In an update on trading in the first nine months of the year, Harbour said operational highlights included: “High return, short cycle, infrastructure-led UK investment opportunities progressed, supporting future production and cash flow.”
This refers to projects that involve the development of discoveries made in areas close to existing production facilities such as platforms and pipelines. These can be used to help firms bring finds onstream relatively quickly and cheaply compared with greenfield developments.
By moving quickly, firms can expect to capitalise on the surge in oil and gas prices fuelled by Russia’s war on Ukraine. Prices have fallen from the levels reached last year but remain high compared to pre-pandemic levels.
Harbour cited the recent start of production from the Tolmount East gas project. It said appraisal work on the Leverett oil discovery had gone well. First oil from the Talbot find is expected next year.
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The update shows how companies such as Harbour are capitalising on the potential of existing North Sea assets, without having to take on the risks involved with exploring in new areas.
Development projects can benefit from the generous investment allowance that was introduced alongside the windfall tax.
The news from Harbour puts into context the company’s decision to snub the North Sea licensing round that was held this year, in what looked like a fit of pique about the windfall tax.
Following the introduction of the windfall tax Harbour said it would cut 350 North Sea jobs and could shift investment overseas.
Meanwhile, Norwegian oil and gas major Equinor has appointed Aberdeen oil services giant Wood to help it maximise production from the Mariner field East of Shetland.
READ MORE: Wood clinches deal with Shell after strong first half
Wood noted that Mariner is expected to produce more than 300 million barrels of oil over the next 30 years, “contributing towards reliable energy supply and security”.
Equinor brought Mariner into production in 2019 and appears happy with how things are going in UK waters. Just two months ago it approved plans to develop the Rosebank field West of Shetland with Israeli-owned Ithaca Energy. Rosebank may be even bigger than Mariner.
Wood's work on the Mariner contract supports around 150 jobs in Aberdeen and offshore. The company employs around 1,500 people offshore the UK.
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