Member Info for Dumbly

Sekforde, explicitly guaranteeing future tax rates may not be possible but deals are often done binding future governments/Parliaments. Look at the recent subsidy deal with Tata re Port Talbot steelworks. So, the outcome of creating a fairly stable tax environment can be created.

Labour has already confirmed they would not revoke licences and to provide fiscal stability something along the lines of point i. in this article could be agreed: https://www.engage.hoganlovells.com/knowledgeservices/news/uk-north-sea-fiscal-and-regulatory-stability_1?nav=FRbANEucS95NMLRN47z%2BeeOgEFCt8EGQ71hKXzqW2Ec%3D&key=BcJlhLtdCv6%2FJTDZxvL23TQa3JHL2AIGr93BnQjo2SkGJpG9xDX7S2thDpAQsCconWHAwe6cJTnP4YyfkSa3wmxaD%2BHibKrZ&uid=iZAX%2FROFT6Q%3D

Are you excluding an agreement to implement a deal as this could have been reached?

Sekforde, all investment decisions now being based on the likelihood that the Government will change in October 2024 and that a more punitive tax regime will be implemented does seem at odds with the Rosebank investment decision. You could be right but there could also be something we don’t know yet. Do you also exclude something like Sunak having given an assurance to push through Parliament a field-specific guarantee of some sort?

Agreed, Stevo. And I imagine similar guarantees or whatever offered here would be offered to others in a similar position, both to encourage others and because it would be anti-competitive not no.

Stumpy, knowing the fiscal conditions and that they will be stable is more than important, it is everything. mrc said in different way more or less the same think. And as romaron said, the government is making the right noises and doing the right things to support the industry. Starmer have not yet said it explicitly, but the underlying message is he also supports what Sunak is doing.

Stumpy, while any improvement to the EPL would be appreciated, for companies investing the EPL is not so bad. The more important is knowing what comes after the EPL. The indications are some agreement has been made on this. How such an agreement could be considered “stable” independently of which party wins the next GE, and beyond, I know not. Time will reveal.

Https://www.energyvoice.com/oilandgas/north-sea/west-of-shetland/502927/equinor-rosebank-uk-government-approved/

Stevo, hard to understand how more tax in absolute could be paid on 8k barrels in MY than on 37k barrels in UK.

For… ROSEBANK to be approved

An article from 3 months ago.

That “fortnight” for Cambo to get approved has come and gone.

As well as not canceling the licenses Equinor and others will have required knowing Starmer’s position on the fiscal conditions too, otherwise his agreement to honour the licences already granted is meaningless. This again supports the view something is brewing regarding agreeing a long-term fiscal regime for hydrocarbon production in the UK. Starmer has backed himself in a corner by saying he won’t grant new licences. He needs Sunak to do the dirty licence-granting work, and probably to also put in place a guaranteed long-term fiscal regime as seems unlikely Starmer would want to be seen as the one instigating a more lenient tax regime.

https://www.thetimes.co.uk/article/9fe1a1ea-0d45-11ee-bf81-8b99fdf73556?shareToken=6431c041c190d0b2057521257ac58c12

Aim, nice letter and, of course, I agree with what you say about the EPL. However, I think that now it is not so much the EPL causing the problem as not knowing what comes after it ends in 2028. Indeed, what could come from 2025 if/when Labour form a government. Knowing the tax conditions and the regime being stable is more important than their actual level. Not knowing means companies won’t invest, as is happening now. EnQuest could live with the EPL if they knew, for example, that after 2028 the tax conditions reverted to as before and we’re guaranteed not to become more burdensome for at least 10 years. The Call for Evidence fits with this thought. Sunak’s announcements this week as the appetizer for something bigger. He wants to Max-out the NS, he knows this is economically and security-wise the right thing for the country. He needs to get this message out there and the impact on people, and then put Starmer in the corner to say clearly what he would do. Lack of clarity would mean companies won’t invest and therefore that Labour is against what’s economically and security-wise best for the country. If Labour will not state the details of their tax policy for this biggest of all issues, then means they are speaking with forked tongues when they say they would honour licenses awarded by the Tories. The party conferences could well be the places to get all this out on the table.

And a further linked and logical step will be to… modify the fiscal regime covering hydrocarbon production in the UK to incentivize companies to invest and match the stated policy objective to “Max-out” production in the North Sea.

A nice quick and meaningless reply from the NSTA :)

I imagine that part of the analysis of an application includes liaison to agree the provisional investment timescales. Is it possible the NSTA is ready to award licences but the applicants won’t commit to further investment until an acceptable and stable fiscal regime is announced? (And accept by Starmer?) Could this situation be what triggered the Call for Evidence? Awarding

licences for the awardees to say they are no longer interested would be rather embarrassing.

The number of applications for the 33rd round of licensing was similar to the previous round. Perhaps the quality/capability of the applicants was lower. The objective of awarding licenses from Q2/2023 has long been missed. As with you, romaron, I feel there is something fishy with the delay.

“The round has attracted similar interest to the 32nd Licensing Round in 2019 which received 104 applications from 245 blocks and part-blocks. In 2019 a total of 768 blocks and part-blocks were offered, compared with 931 this year.

The bids will now be carefully studied, with a view to awarding licences quickly and supporting licensees to go into production as soon as appropriate. There are several necessary consents after licensing and before production to ensure these developments are also in line with net zero.”

Dr Nick Richardson, NSTA Head of Exploration and New Ventures, said:

“We have seen a strong response from industry to the Round, which has exceeded application levels compared to previous rounds.

We will now be working hard to analyse the applications with a view to awarding the first licences from the second quarter of 2023.”

https://www.nstauthority.co.uk/news-publications/news/2023/33rd-round-attracts-115-bids-across-258-blocks-or-part-blocks/

Romaron, even if the bids for the 33rd licencing round are significant, there will not be actual investment without changes to the fiscal regime. My guess is that the outcome of the Call for Evidence will be a proposal or whatever to satisfy the companies to invest and will also show that it would generate more longer term value than keeping the EPL as-is. Value in terms of tax revenue, growth, jobs, skill retention, lower emissions, as well as… greater energy security (could creative thinking be able to assign a $ value also to these last two things?). Now, if the OBR and CCC could also be onboard in validating the proposal it would be hard for Starmer to object, and there won’t be investment unless be also accepts the proposal. The only argument he could try would be the UK won’t need the extra hydrocarbons the investments would produce, and that would be ridiculous. Sunak will also be keen to counter the “Inaction Man” label Captain Hindsight has given him, so chances are action on this matter will be sooner rather than later.

Romaron, your reply to KYC links into my question from a little earlier. My guess is Sunak and co will bring forward changes to the fiscal regime before a GE. I doubt they will be able to legislate to guarantee to keep this new fiscal regime stable past a GE. But by changing things before a GE they can throw down the gauntlet to Labour to clarify their position beyond any doubt. Without such clarity confirming Labour would maintain this new fiscal regime from the Tories companies won’t invest and Starmer can be attacked front on for risking the country’s security and stunting economic growth and revenue income. At such a moment given the geopolitical situation and cost of living crisis, it’s unlikely there could be bigger issues. A government’s first priority is the defense

of its citizens.

So, assuming little will change regarding new investment in the NS until there is info about the fiscal regime changing to be something like acceptable and stable blahdy blahdy blah… The question becomes For Sunak and co what course of actions and when is the best for most political gain/vote harvesting?

Is it:

A. Arrange all (including acceptable fiscal conditions) but don’t legislate and instead make it a major policy matter for the next General Election (and if Labour get in and have opposed the Tory policy then they should not be able to reap the economic benefits of such a policy – unless they did a...180)?

B. Arrange all (including acceptable fiscal conditions and, maybe, a mechanism to guarantee these conditions past the next GE?) and legislate/implement before a GE and say something like the energy security of the country is more important than playing politics, as Labour’s policy would put the country at energy-risk and damage it economically? This way, however, should Labour win the GE they will have been handed the economic benefits without doing the dirty work.

Whatever and whenever Sunak will need to expose the ambiguity of Labour’s position. Does their position of not granting any more licences mean they will allow existing licences awarded to be exploited? And at pre-agreed fiscal conditions or would they use tax to effectively stop the companies investing to exploit the licences already granted?

If an acceptable tax regime can be agreed by the parties (including by the OBR? and CCC??), it is still unlikely the companies would invest unless from Labour they had assurances (maybe legal guarantees) of the continuation of an acceptable fiscal regime should they win the GE or the Tories were able to put some legislation in place to provide a legally binding guarantee of the fiscal regime going forward. If the Tories cannot put in legislation to guarantee the fiscal conditions past the next GE and Labour avoid providing the required assurance/guarantee then Sunak could focus in on Labour's policy post a GE putting the country’s energy security at risk whilst at the same time damaging the country economically.

So, which is more likely, A or B? Or something else? Not what you would like, but what you think is most likely please.

Sekforde, as you say “poised to pounce” with EnQuest the vulnerable prey. I’d be OK with a deal, but the time does feel quite right yet. My guess is in the next 6 months something will happen improving the EPL/ESIM and/or fiscal regime stability. Don’t hold me to this tho! Unless a deal could be done taking account of these possible improvements, it feels EnQuest would be better to avoid risk of selling out too cheaply and losing the chance to do some M&A of its own to extract more value. After such a long wait the company can wait a bit longer. Now, if Harbour offered 40p…

Not directly related to EnQuest, so just ignore if you prefer, but an article I found interesting (and worrying) from Andrew Marr : https://youtu.be/1rSstwTur6Y?si=c1eaRbWvl0972QYc

The main links I see to EnQuest are his highlighting of the US’s better position re energy security due to the fracking revolution, and the UK’s absolute need for economic growth. The policies of the Torys and Labour are going in the exact opposite direction. Energy security and economic growth are being squandered.

Yes, himm, almost all due to EPL. It is a trickster’s scheme and a trap. EnQuest, and others, cannot give the wrong message now by investing. The government thought they would get the revenue from the EPL and stimulate investment. Well, that worked well. And the ESIM is a pish-take. With the EPL as is there will be less tax revenue over the longer-term. And less growth, more imports, more emissions blahdy blahdy blah. It will not be possible to ignore the outcome of the call for evidence or just bat it away by some BS comment from The Treasury. The industry cannot “blink first” by investing. Plus, would just be bad business. Also, to maintain pressure and a united front, best for the smaller Independents that Equinor does not proceed with Rosebank at current conditions. It has gone way past a small modification of the EPL being enough. Especially with Labour in the wings. Some legally binding legislation to provide an acceptable and stable fiscal regime will also be needed. Otherwise no new big investments.

Why was the RNS for de-listing and half-year results done on the same day? A regulatory reason? The desire to obfuscate, so the impact of each could not be easily separated out? Get all “negative” news, if indeed negative, out in one go?