NEO Energy, and its 100% owner HitecVision, have announced that they are slowing down investment activities due to UK fiscal and political instability.
The operators of the Buchan Horst development shared that in light of the government’s recent announcements regarding the Finch ruling, the project’s “consultation is not expected to conclude until Spring 2025.”
NEO Energy shared: “Consequently, the Offshore Petroleum Regulator for Environment and Decommissioning (OPRED) has further announced that while the consultation is ongoing, they will be deferring assessment of all environmental statements, including ones already in progress, such as the Buchan Horst project.”
The UK government last week said it will not challenge judicial reviews brought against North Sea developments Jackdaw and Rosebank.
The decision was announced alongside plans for new environmental guidance for oil and gas firms on polluting emissions.
The guidance is necessary in light of the Supreme Court ruling on the Finch development. This set a legal precedent that requires regulators to consider the impact of burning oil and gas, called scope 3 emissions, in the Environmental Impact Assessment (EIA) for new projects.
It is now thought to be up to the oil and gas firms to press ahead with their own challenges and they may be required to address scope 3 in updates to their impact assessments.
NEO Energy said it “awaits clarity regarding the UK regulatory and fiscal framework” for its Buchan Horst development before it can measure the impact of these changes.
The Aberdeen-based oil firm also hit out at the changes to the UK’s windfall tax. Under Labour, the headline rate imposed on operators is set to increase to 78%.
In addition to this, investment allowances have been removed from the already controversial fiscal policy and the sunset date has also been pushed back.
Changes are also set to come to the capital allowances scheme under the windfall tax which some argue is necessary for new developments.
Speaking on its investments being slowed and the Buchan Horst project, NEO said: “This will inevitably delay first oil timing in relation to the project which was previously forecast to be late 2027.
“The joint venture will seek a licence extension in order to continue technical evaluation in light of these changes to tax and environmental consents.”
Buchan project partner, Jersy Oil and Gas, as also commented on the political instability in the UK.
CEO Andrew Benitz said: “Whilst demand for hydrocarbons continues during the energy transition, homegrown energy is the right solution.
“A project like Buchan has the potential to produce some of the lowest emission barrels of any project globally.
“Emissions arising from the combustion or use of those hydrocarbons will result in the same emissions as comparable barrels regardless of where they are produced.
“Homegrown energy should always trump imports, creating domestic economic growth, jobs and valuable UK tax receipts.”
This is not the first time that the Buchan project has been delayed by political headwinds in the UK.
In June, Jersey Oil and Gas shared that first oil from Buchan had been pushed back to 2027 following the call for a UK general election.
Production was originally tipped to kick off in the fourth quarter of 2026 but has now been pushed back to “late 2027.”
NEO Energy for sale?
It has been rumoured that NEO Energy will be put up for sale by its private equity backers, HitecVision.
Senior analyst for Wood Mac James Reid told Energy Voice in July that HitecVision has come to “the end of their investment horizon” with NEO Energy.
Reid also explained that a “fair chunk” of NEO’s UK portfolio is pre-production or pre-FID.
In light of further changes to UK regulations and fiscal policy, NEO Energy may become less lucrative for potential buyers.
NEO picked up “quite a lot of licenses in the 33rd licensing round” both as an operator and as a partner and despite recent changes in the UK, if these projects get off the ground, the Aberdeen firm’s assets will add longevity to a prospective buyer’s portfolio.
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