Orcadian Energy (AIM:ORCA) has warned that “punitive taxes” from the government risks undermining the UK’s oil and gas industry.
The company’s results for the year ended 30 June 2024 called for greater clarity from the government on its plans for the North Sea fossil fuel industry.
In a statement from the company’s chairman, Joseph Darby, and CEO, Stephen Brown, they said: “The government has enacted punitive taxes which limit returns and the regulatory framework has been subjected to an incessant stream of lawfare which culminated in the Finch ruling requiring every environmental impact assessment to take into account Scope 3 emissions.”
They added that action on climate change needs global agreement on ways to reduce demand for fossil fuel energy.
“Constraining supply can only impact demand by increasing the price of energy; increasing the price of energy will undermine support for any climate action,” they said.
“So, politicians and engineers alike need to focus on delivering low-carbon energy for the lowest cost possible.”
In the wake of challenges on Shell’s Jackdaw project and Equinor’s Rosebank project, the UK’s oil and gas industry is awaiting guidance on how environmental impact assessments are prepared, which is expected in spring 2025.
The industry is also looking for the government to publish guidance on the successor fiscal regime from 2030 onwards.
“We will have to wait and see how government intends to tax the industry in the longer term, and we hope for a balance between ensuring a fair return for investors and maximising government revenues,” the statement added.
“We are confident that sense will prevail, and the industry will have a bright future in the UK. But we will all have to wait for the outcome of these consultations before any company commits to a new development project of scale.
“However, despite all the gloom we see great opportunity in the UK. The pendulum always swings too far and this time taxes have gone too high, and the hurdles development projects have to clear have become too many. Things will change and there is hope that the companies that stick by the UK will eventually prosper.
Supply and demand
The statement added that Orcadian Energy expects that “geology, not politics, will be the constraint on US production, which underpins the world’s ability to supply energy,” in 2025, following the election of Donald Trump this year.
While Trump has previously committed to lowering energy prices, Orcadian added: “Predicting oil and gas prices is futile, they will either go up or down and most likely will go up and down.
“However, we can be confident that the International Energy Agency (IEA) will be surprised by the strength of demand and OPEC will be surprised by the strength of supply, averaging these two organisations projections is not a bad way to divine the future.”
In addition, the company’s results posted a loss for the year to 30 June 2024 of £938,471. This showed a reduction from the equivalent period of 30 June 2023, when it incurred a loss of £1.18 million.
The loss mainly arose from salaries, consulting and professional fees along with general administration expenses, the impairment of intangible assets and new business development.
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