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Romaron, Miliband has been allowed to drive this. His eco-Marxism wet-dream risks to create havoc with the UK’s energy sector and greatly reduce the UK’s prosperity including, indeed especially for, the normal working person. He has previous in this regard and needs to be called out. The Conservatives, at the right time, need to make this THE issue of the election.
(Good to see numbers are being attached to decisions, and woukd be good to see the breakdown of that £26b of loss of economic value DW refers to and get it vetted /approved by a respected body)
Rumour is in a fit of pique Red Ed threatened to throw his toys out over dropping the 28B pledge unless he got changes to the Windfall Tax, knowing these checks would effectively stop new investment, making granting licenses largely irrelevant. Actually… i just made that up, but nonetheless is highly plausible.
Maybe better for the Conservatives not to fight these changes, let Labour confirm them in their manifesto and then show the damage they will do to jobs, public purse, security and so on. Would need to get onboard OEUK and the Oil and Gas companies, Unions, OBR, and the Scots. What an alliance that would be!
KO, Re Bressay, Stevo was not referring to the licencing/NTSA approval situation but the IRR should Labour implement what they said yesterday. As you will see from my 19:34 post yesterday I agree with Stevo.
Also, your 21:31 post yesterday implied you understood Labour were proposing a differentiated future fiscal regime for the Majors and the rest - do you stand by this understanding?
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The Conservatives would need to spell out how they would adjust the fiscal regime (maybe even make changes soonest) and the different outcomes this would deliver. They need to show the impact their plans w/could have on production, net import of hydrocarbons, and the consequential impact on the treasury. More indigenous hydrocarbons won't directly reduce their price, but it will indirectly due to the improved income for the Treasury. My assumption is more O&G production, and the overall positive impact on GDP and tax revenues, will outweigh the extra WFT Labour's plan would bring in. Then there is all the other stuff; the jobs, skills, realistic pathway for the transition. Finally, it needs to be driven home that the UK and its citizens are super lucky to have the opportunity to have its own hydrocarbons, something most countries would jump at, so why squander this natural luck and instead self-harm? Would Russia or China renounce such an opportunity to gain a competitive advantage? Add in also all the stuff about energy security and war risks.
CAN ALL THIS BE PACKAGED IN A WAY SO VOTER'S CAN ACCEPT IT IS A/THE MASSIVE ISSUE FOR THE ELECTION AND THAT IT IS BETTER THAN LABOUR'S PLANS?
To note, it seems Scotland will likely be key for Labour getting a workable majority. The polling suggests the majority (I saw 70% somewhere) of Scots are in favour of new O&G development. It should not take much to convince them that the Cons plan is better for Scotland.
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Could there be a silver-lining to the position/measure announced by Starmer yesterday?
Labour's position is now clear. Surely, even for Sir Keir, no more U-turns or even swerves are possible. They would extend the Windfall Tax (not calling it an EPL) to 78% and 2030 (probably) and reduce allowances.
(I also heard RR on R4 this morning, she referred to extending the windfall tax on the "big" oil and gas companies - I doubt "big" is meaningful, just rhetoric I think, as when they say "giant", and I cannot see anyway there would be a different fiscal regime based on company size in the UK).
Labour have betrayed the O&G sector - https://www.energyvoice.com/oilandgas/north-sea/547509/labour-windfall-tax-oil-gas/?utm_source=Sailthru&utm_medium=email&utm_campaign=Energy%20Voice%20Daily%20Newsletter%20B%202024-02-09&utm_term=Energy%20Voice%20-%20Newsletter%20%28B%20Test%29 Any thought Labour could listen to the outcome of the Oil and Gas Review Fiscal Regime have gone out the window due to other expedient priorities they think will garner more votes.
Is the silver lining that Labour having now clearly set out their energy transition policy stall allows the Conservatives to do the same and make it a big, if not the biggest, issue for the election?
With Labour, the UK is effectively closed for new O&G investment. There will be some but much less than there could be. The Conservatives need to confirm their energy transition aim is broadly the same as Labour's, but the means and the timing to deliver it differ drastically. The public needs to be asked if it wants a dreamy fairy tale feel-good energy transition narrative which will cause longer-term cause enormous economic damage and increase in household costs, or a realistic energy transition plan, albeit less palatable, but one which will deliver a far better long-term economic and security outcome for the country and its people.
More nationalisation without compensation. What Johnson and Sunak started, Starmer will finish. Bet they did not get caught holding O&G shares. The assumption has to be 78% tax, or worse, will be permanent. For PI’s there would also be personal tax on any dividends/capital gains. Game over for PIs. Profitable UK production for sale probably just got cheaper or, put differently, the value of tax credits just increased. Maybe the company could salvage something on that front. Bressay happening just became more unlikely, as EP setting sail just became more likely. Who will risk investing in E&P in the the UKCS when the potential reward is so slim? Time to accept to shut the E&P shop in the UK. Have to hope that discovery of gas in Indonesia really is very big and EnQuest’s participation significant.
The BBC website is reporting: "The party [Labour] will extend its Windfall tax until the end of the next parliament, which they say will raise £10.8bn. Currently the plan to increase the overall tax rate on oil and gas producers from 75% to 78% ends in December 2025".
The Windfall Tax is not "its" i.e. Labour's, as the Conservatives introduced it, the current rate is 75% not 78%, and it's currently set to end not in 2025 but 2028. Labour, if elected, would now extend it to "the end of the next parliament". Whatever the details, and however one looks at it, this is not good news (unless, I suppose, the "next parliament" is short-lived).
Romaron, indeed it is sober reading. I thought of you as I read the section:
"The claim that wind energy is ‘nine times cheaper’ than gas, as made by website Carbon Brief in August 2022, never was true – the analysis behind it was economically inappropriate and mathematically flawed to boot. For one thing it compared the long-term, guaranteed prices paid to operators of wind and solar farms with the ‘day ahead’ prices, which have to be paid to owners of gas plants to switch them on for a few hours to make up for a lack of wind and solar power. But now the ‘wind nine times cheaper’ claim is looking even more of a fantasy."
"Is the popular energy transition narrative valid or is it imaginary?"
https://www.artberman.com/blog/betting-the-world-on-an-imaginary-energy-future/
Clearly it is imaginary, and slowly this is is being understood. Today's move away from the "28B" pledge is another small step towards accepting this.
“…however saleable a promise of running down the North Sea might have been a couple of years ago, it is a lot less so now with large parts of the oil and gas-producing world in turmoil. There may be a rational argument against making that connection but try selling it on an Aberdeen doorstep! In fact, don’t bother.”
https://www.energyvoice.com/opinion/546780/oil-and-the-general-election-the-banners-vs-the-mandaters/
Kraken, good info, thanks.
As Stevo has pointed out, for companies with tax losses the EPL investment allowance is not as beneficial as for companies without tax losses. EnQuest would benefit best at first to find a way to accelerate the use of the tax losses. They could do this by buying profitable production. Another way would be if past tax losses were allowed against EPL liabilities (chance of this happening?). At current fiscal regime, the very best would probably be a co-ordinated use of the tax losses and new investment once the tax losses are used up and the EPL is still in place. Could find a way to use the $1.3B or so of tax credits in, say, 3 years, and before the EPL is scheduled to end in 2028? Seems unlikely.
One hope AB is using all his power and connections to pressurise the Conservatives to understand the damage the EPL/WFT has done and the related risks for the UK's energy security. What has he to lose?
I see all the hyperbole about a war with Russia and therefore the need for more troops and equipment - what about the energy to power the equipment?
Something has to be done in the Spring Budget - at least allow past losses/credits to be used against the EPL/WFT.
(I realise writing this is just a release of frustration, but one really hopes AB is shouting as loud as he can to do something with the EPL/WTF)
Kracken, it would be good to also have something else to accelerate the use of the tax credits, if necessary as a priority over new field development as it would be better tax-wise, and some detail about EnQuest’s participation in the “big gas discovery [in Indonesia]” including an indication of its value to the company.
Last night: Ayes 293 Noes 211
https://hansard.parliament.uk/Commons/2024-01-22/division/DB3CCE18-DD50-4E5C-B7F1-84B5307C50C2/OffshorePetroleumLicensingBill?outputType=Chart
When AB refers to Magnus and Kraken and new licences, does that mean even new drilling in those fields requires new main licences? I thought new wells on fields with an existing licence was fairly straightforward and not considered a new new licence? Is he referring to new new licences to tie-back to existing infrastructure?
And Bressay, has that not already a licence?
something does not add up, l7. if this se asia affiliated company’s very “big discovery” is important enough to use as one of the 4 reasons ab gave in the cnbc interview to support his comment 2023 had been a good year for enquest then, logically, there should have been an rns? or, at least, a press release? not sure i can be ****d to ask ir about this. i expect to be underwhelmed when the reality of the likely benefit for enquest is revealed.
L7, you said AB’s “comment on a gas find with a partner was interesting but unclear”. He referred to “an affiliated company” but did not say it was gas regarding them. He said “we have an affiliated company in SE Asia which had a very big discovery which is moving to pivoting our businesses”. Also in the recent CNBC interview he focussed on Veri, pivot to gas now at 20% in UK. That’s what I mean by AB “spinning”. Who is this “affiliated” company? Why say SE Asia and not where and who? Commercially sensitive? If so, then say nothing. What have they discovered? What are the details of EnQuest’s participation in the “affiliation”? Has anything else been said about this before? If potentially so important, why not? AB has a habit of diverting attention and being unclear like this, throwing out good vague news which does not result in… such good news, and the market hates behavior like this.
Voice, Frac and others, frustration was in good part behind my comment. However… can company performance and SP really be separated out over such a long long period? (The fiscal regime improved marginally in 2023 due to the ESIM, yet the SP almost halved.) AB is not a spinner and generally understated with his comments. The spin aspect I felt in the interview was that he was diverting attention to Veri, increased gas production, and the very large discovery by an affiliated company in SE Asia (have we missed that, who is it, what are the details of the affiliation?) rather than on what remains EnQuest’s core activity in the UK. His view that it was a good year for the company without any reference at all to the halved SP and the reasons for this, and what's being done about it, jars with me. Like the SP is not something he wants to directly get involved with and address head on. Maybe not the right forum? Or maybe the right forum to get the message out there what EnQuest is targeting to do in the UK. I would have also preferred he was stronger in what he said about the ongoing impact of the UK fiscal regime and how difficult to make investments there. Just saying little will happen in an election year and that “the government is working hard, maybe, to try and mitigate some of the decline in investments” felt too passive. He comes across as a sort of wise industry commentator, rather than a hungry CEO (which he probably no longer is…) wanting to invest in the UK but frustrated by the fiscal regime and the UK politicians’ intentions towards the UKCS.