North Sea energy giant cancels projects over UK’s ‘unfavourable fiscal regime’

Ithaca Energy has wanted shareholders that oil and gas production in 2024 will be lower than this year, despite record profits, blaming windfall tax. 

In total, the company has paid out £175million to HM Revenue & Customs as a result of additional levies introduced in a bid to recoup some of the record profits enjoyed by the sector due to the energy crisis. It has also taken a £257milliom hit from impairment charges incurred after deciding not to continue further drilling at Harriet field, citing an unfavourable investment climate in Britain. 

The company has announced plans to cease domestic operations in the Greater Stella Area, Montrose Arbroath Area, and Elgin Franklin Area of the North Sea, while stakeholders were also told that merger opportunities would be pursued to consolidate the firm’s position ‘until the fiscal regime is improved’ in Westminster. Downing Street is currently consulting on the tax system for oil and gas in a bid to make it simpler and easier to predict, although details of what alternatives may look like have yet to be revealed. 

‘The Energy Profits Levy continues to have a direct impact on investment in the UK North Sea and Ithaca’s own investment programme across its diverse high-quality operated and non-operated asset base,’ said Executive Chairman Gilad Myerson. ‘We continue to constructively engage with the UK government to highlight the impact of the current fiscal regime to the industry’s outlook and to the UK government’s stated energy security and net zero ambitions.’

Despite these warnings, Ithaca has also just confirmed a second dividend for shareholders of £104million from its half-year results. This brings total year-to-date payouts to £208million, with a full annual payout of £400million now expected. This is a result of more than £774million in profits for the period – up from over £717million from 2022.

The UK Government recently announced hundreds of new fossil fuel licenses would be made available for areas in the North Sea, resulting in a major backlash from climate scientists and the environmental community. Meanwhile, a decision is still to be made over the future of the Rosebank field – the largest undeveloped project in the region, which could produce 500million barrels of oil and gas over its operational lifespan, which Ithaca has a 20% stake in.  

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New North Sea oil gas licenses threaten marine protection areas

UK ‘greenwashing oil and gas’ with Scotland Acorn CCS approval

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Image: Maksym Kaharlytskyi