US oil giant Chevron has announced it will leave the North Sea after 55 years, the day after Jeremy Hunt rejected industry pleas for support at a private meeting.
Chevron said it decided to exit the region after a review of its global operations to determine “whether assets are strategic and competitive for future capital.” The company insisted this was not related to the UK tax regime.
It came a day after Hunt rejected calls to delay a windfall tax that has boosted the tax on oil profits to 75%.
Industry leaders told Mr Hunt there was “one last chance” to halt a “catastrophic” decline in investment in British waters, threatening at least a 50 per cent decline in oil and gas production by 2030 to decrease.
However, the Chancellor is believed to have made no promises to change course – noting that Labour’s threats to increase the windfall tax by a further 3% and cut investment fees if they win the election are the most important were a deterrent for investors.
The meeting was attended by most of the major operators in the North Sea, including Shell, BP, Harbor Energy and Ithaca Energy.
Chevron was not in the room, but was informed of the outcome by trade organization Offshore Energies UK. The company claimed the timing was coincidental.
A spokesperson said: “Chevron’s announcement is not related to recent announcements regarding the UK windfall tax. The announcement relates to assessing a global portfolio that offers the best shareholder returns.”
Chevron is the third largest oil company in the world and one of the last major players still active in the North Sea. Exxon exited in 2021 and others such as Shell and BP have sold many of their assets.
The company is to sell its 19.4 percent stake in Clair Field, which is 50 miles off the coast of Shetland and is the largest in British waters, with an estimated eight billion barrels of oil covering 80 square miles.
It will also divest associated assets, including interests in the Sullom Voe Terminal, the Ninian Pipeline and the Shetland Islands Regional Gas Export pipeline.
The deal is expected to fetch between $800 million (£633 million) and $1 billion once a buyer is found.
Chevron was one of the first oil companies to drill in the North Sea in the 1960s, but has since retreated from exploration and production after divesting its drilling assets in 2019.
Analysts say production from the North Sea is already declining because the largest oil and gas fields have been dried up. Finding and extracting what remains is already becoming more expensive.
They warn that imposing additional taxes on the industry will undoubtedly act as a deterrent to further investment – pointing to a similar cut by Harbor Energy, Britain’s biggest oil and gas producer, which has halted all investment in the North Sea.
Chris Wheaton, an analyst at Stifel, published a new analysis of the North Sea outlook on Wednesday, titled: “Will the last energy company leaving the North Sea please turn off the lights.”
It warned that windfall taxes threaten to accelerate the decline in oil and gas production in the North Sea to such an extent that output will fall by as much as 70% by 2030, leaving the country increasingly dependent on imports.
He criticized the windfall tax and Labour’s plans to increase it, saying: “Loss of investment means loss of jobs and skills for the energy transition.”
Mr Wheaton suggested that 100,000 of the 200,000 jobs linked to the industry are at risk of disappearing by 2029, with Britain importing 80% of its gas before the decade is out.
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