THE UK Government’s £10billion tax raid on North Sea operators has cast doubt on the future of another significant discovery.
Oil and gas giant Royal Dutch Shell said yesterday it would not develop the Fram field, which holds hundreds of millions of barrels of oil, until it had assessed the full extent of the tax impact.
The firm said it had submitted a field-development plan to the Department of Energy and Climate Change, but the tax rise had made even that decision more difficult.
Shell operates Fram, which is thought to hold up to 300million barrels of oil, on behalf of a joint venture with Esso.
The field was discovered in 1969 but Shell only realised its full potential 40 years later after drilling a fresh appraisal well.
A Shell spokeswoman said a floating production vessel would be used to extract oil from between six and 10 wells, achieving a peak production of 20,000 barrels of oil and 150million cubic feet of gas per day.
Should the development go ahead, production could start in 2014. Shell declined to disclose the value of Fram.
The spokeswoman said the tax rise meant the future of the development was still unclear despite the submission of a field development plan.
She added: “The supplementary tax increase and uncertainties in future returns have made the recent decision to proceed more difficult.
“The full extent of the tax impact on the Fram field will be assessed before the final investment decision.”
The discovery is the latest to be thrown into doubt by Chancellor George Osborne’s surprise decision to increase the levy by 12% in March.
Although progress on Statoil’s £6billion Mariner and Bressay developments has resumed, both were put on hold in the wake of the Budget announcement and Centrica’s South Morecambe Bay gas development was shut down for nearly two months.
Shell has said previously the extra tax would add £366million to its bill by the end of next year.
Meanwhile, the fourth-largest operator in the UK North Sea became the latest firm to reveal the cost of the levy increase.
Total revealed the levy rise had cost it an additional £52million in the second quarter of the year.
The French company reported a year-on-year drop in profits despite sales rising 9% to £39billion. Adjusted net income fell 6% in the second quarter, to £2.4billion.
Chief executive Christophe de Margerie said higher maintenance, including in the North Sea, shutdowns in Libya and weak refining margins in Europe had impacted the business.
Oil and gas production fell 2% in the period and refining margins slumped.
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