North Sea operator Hartshead Resources (ASX: HHR) has warned of uncertainty and possible delays to a new UK gas project due to Labour announcements on the windfall tax.
In a stock market update, the Australian company said there was uncertainty in the UK gas sector due to changes in the Energy Profits Levy (EPL) proposed by the Labour Party.
Hartshead holds a 40% stake in a series of North Sea fields, including the Anning and Somerville developments in the Southern Gas Basin.
At the start of this year, the company announced a deal for an $A800 million (£414m) ‘financing backstop‘ to progress the first phase of Anning and Somerville.
The project was expected to achieve first gas as early as Q4 2024, however Hartshead said the project timeline is now under review.
Windfall tax uncertainty
Hartshead said “given that the Labour Party are currently significantly ahead in polling”, with UK elections due to be held this year, the company is “presently assessing project economics associated with the proposed Labour party tax changes”.
“Additionally, UK NBP gas prices (`60p/therm) and gas futures have softened from their 12-month high of 136.7p/therm in Oct’23, due to an unusually mild winter in Europe leading to near record predicted European gas storage inventories at the exit of the winter season,” Hartshead said.
“The project timeline is currently under review, however the likely delay in awarding of key contracts for capital items associated with the long lead items for development would result in a delay to first gas, previously scheduled for 2025.”
‘Damaging and self-defeating policy’
Hartshead chief executive officer Chris Lewis said the announcements from Labour were “disappointing” for the company as it introduced uncertainty over the development project, which “before then had been moving forward with significant momentum”.
“The danger is that these proposals will cause a flight of capital to other jurisdictions, decimate the skills and supply chain required for the UK to lead the energy transition and result in the loss of tens, if not hundreds of thousands of jobs.
“We are working with industry bodies, industry partners, contractors, unions, MPs and other stakeholders to understand the precise plans and to highlight the danger of damaging and self-defeating policy.
“As the situation develops and becomes clearer, I look forward to updating shareholders once more.”
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