The CEO of a North Sea gas company has said his team was “days away” from issuing key contracts when Labour’s promise of a “proper windfall tax” sparked job cuts.
Hartshead Resources (ASX: HHR) CEO Chris Lewis, whose firm is developing the Anning and Sommerville hub in the Southern North Sea, said they’ve made “material and significant” cuts to the project team over the uncertainty.
He said Hartshead was “days, maybe weeks away” from issuing work for construction of the platforms, subsea cables to tie it to the Shell Leman Alpha platform, and duty holder and well management contracts, following a six-month tender process.
“We were that close, we were ready to go,” he told Energy Voice, but Hartshead and partner RockRose Energy decided they could not move forward given the fiscal uncertainty.
“The 8th of February happened, Labour came out and said what they said, we were thrown into a world of significant fiscal uncertainty and we had to step back from that decision and reevaluate.
“That’s fundamentally why we have reduced the headcount, we had a project team that we had been building over a three-year period from the beginning of 2021 to the beginning of 2024, that was in place ready to deliver project execution.”
Hartshead had built up engineers to cover delivery of Anning and Sommerville’s two wellhead platforms, delivery of the subsea contract and experts in the wells department.
Mr Lewis added: “Once we took the decision that we weren’t going to move forward with all those contract awards, we had a project team that would have had nothing to do.”
Mr Lewis said he expects Hartshead and RockRose will be able to proceed with the Anning and Sommerville plan at a later date, but not until clarity is delivered on the future fiscal regime from the next government.
“Our ability to award these contracts, it is fundamentally dependent on getting some clarity out of the potentially incoming Labour administration around what fiscal policy looks like.
“And without that clarity, we’re not able to take an investment decision, and without an investment decision we don’t need the team to deliver the project.”
The Labour Party has been contacted for comment.
Labour windfall tax promise sparks job cuts
On February 8, as part of its Green Prosperity Plan, Labour pledged a “proper windfall tax” on the industry, extending the existing levy and removing investment allowances currently in place.
Industry experts have warned that would quash any new investment in the sector and see tens of thousands of job cuts.
Hartshead, which is a new pre-revenue firm, is not directly affected as it does not pay tax – but any partners helping to fund the project likely would be.
Mr Lewis said: “What do we need? Clarity, certainty, stability, predictability. Post the next election, that will be the 5th change in fiscal policy in what, 2 1/2 years? Ridiculous.
“We need to know what we’re getting ourselves into. In particular, it’s the discussion around the allowances.
“For us, we have no revenue, we pay no tax, we’re investing. So the investment allowance obviously only has an impact if you are revenue-generating and tax paying from oil and gas production profits.”
Hartshead Resources CEO: Rhetoric damaging for sector
In the run up to a looming general election, with Labour leading the polls, Mr Lewis said fiscal uncertainty damages not just jobs and investment but receipts to the Treasury to fund public services.
He said: “Jobs are really important. Labour should be about protecting jobs more than anything else, that’s where the Labour Party came from, protecting workers, came out of the trade union movement. This does not do that, what Labour are doing at the moment.
“It doesn’t protect jobs today, and it doesn’t protect jobs in the future because there will be companies that will not be able to survive the period between now and when we have full energy transition jobs in floating wind, CCS, and hydrogen.
“We need to preserve the supply chain and the skilled workforce today to have those available for tomorrow.
“That’s nothing to do with the difference between oil and gas. That’s just about solid industrial strategy.”
The industry has repeatedly pointed out that oil and gas giants’ profits – like Shell, BP or TotalEnergies – are driven by areas outside of the UK and are not made here, despite rhetoric to the contrary from politicians, NGOs and parts of the media.
Mr Lewis added: “When Labour came out and said we’re going to “close the loopholes that returned cash to oil and gas giants”, they were effectively damaging oil and gas minnows and mid cap companies, you know from Harbour and Serica all the way down to us. These aren’t oil and gas giants that they’re having a punitive impact on.
“And so I think the rhetoric is really unhelpful and I think there’s just no recognition of what oil and gas has brought to the UK in terms of, you know, jobs and industry, receipts to the Exchequer, energy security, and it would be nice to see a little bit more balance in the rhetoric.”
Australia-listed Hartshead has been developing licence P2607 which contains the Anning and Somerville fields, as well as the Hodgkin and Lovelace plays.
Hartshead believes the permit to hold 2P reserves of 301.5 billion cubic feet of gas, equivalent to around 52 million barrels of oil.
Last year the company farmed out 60% and operatorship of the licence to Viaro Energy (parent of RockRose Energy) in a deal worth £105m.
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