The US Oil Giant is Leaving the North Sea as Hunt Refuses to Abolish the Tax - Latest Global News

The US Oil Giant is Leaving the North Sea as Hunt Refuses to Abolish the Tax

Hunt points out that Labour’s tax policy is the biggest deterrent to investors. – Hollie Adams/REUTERS

US oil giant Chevron has announced it will withdraw from the North Sea after 55 years, a day after Jeremy Hunt rejected industry requests for support at a private meeting.

Chevron said it decided to exit the region after conducting a review of global operations to determine “whether assets are strategic and competitive for future capital.” The company insisted this had nothing to do with the UK tax system.

This came a day after Mr Hunt rejected calls for an easing of a surprise tax that pushed up the tax on oil profits to 75 per cent.

Industry leaders told Mr Hunt there was “one last chance” to halt a “catastrophic” fall in investment in UK waters that could reduce oil and gas production by at least 50 per cent by 2030.

However, it is understood the Chancellor has made no commitments to change course. She pointed out that Labor’s threats to increase the windfall tax by a further three per cent and cut investment allowances if they won the election were the biggest deterrent to investors.

The meeting was attended by most of the major North Sea operators, including Shell, BP, Harbor Energy and Ithaca Energy.

Chevron was not in the room but was informed of the outcome by industry body Offshore Energies UK. The company claimed the timing was coincidental.

A spokesman said: “Chevron’s announcement is not related to recent announcements relating to the UK random tax. “The announcement relates to the assessment of a global portfolio that provides the best shareholder return.”

Chevron is the third largest oil company in the world and one of the last major players in the North Sea. Exxon left in 2021 and others like Shell and BP have sold many of their assets.

The company will sell its 19.4 percent stake in the Clair Field, which lies 50 miles off the coast of Shetland and is the largest in British waters, with an estimated eight billion barrels of oil spread over 85 square miles.

In addition, the company will divest related assets, including interests in the Sullom Voe Terminal, the Ninian Pipeline and the Shetland Islands Regional Gas Export Pipeline.

The deal is expected to fetch between $800 million (£633 million) and $1 billion once a buyer is found.

Chevron was among the first oil companies to drill in the North Sea in the 1960s, but has since withdrawn from exploration and production after the company divested its drilling assets in 2019.

Analysts say that production in the North Sea is already declining because the largest oil and gas fields have been dried up – so finding and producing the remaining oil and gas fields is already becoming more expensive.

They warn that burdening the industry with additional taxes will inevitably deter further investment – and point to a similar cut by Harbor Energy, the UK’s largest oil and gas producer, which has halted all investment in the North Sea.

Stifel analyst Chris Wheaton published a new analysis of the North Sea outlook on Wednesday titled: “Will the last energy company to leave the North Sea please turn off the lights?”

It warned that unexpected taxes could accelerate the decline in oil and gas production in the North Sea so quickly that production will fall by up to 70 percent by 2030, leaving the country increasingly reliant on imports.

He criticized the windfall tax and Labor’s plans to increase it, saying: “Loss of investment means the loss of jobs and skills for the energy transition.”

Mr Wheaton suggested that 100,000 of the 200,000 jobs linked to the industry would disappear by 2029, with the UK importing 80 per cent of its gas before the end of the decade.

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