This investment slowdown will delay the anticipated first oil production for the Buchan Horst project. Credit: Sirirui Images/Shutterstock.

NEO Energy has decided to slow down its investment activities across its development portfolio due to escalating regulatory and fiscal uncertainties in the UK oil and gas sector.

This strategic move is in direct response to a series of recent government measures that have introduced heightened challenges for energy projects.

The decision follows the Department of Energy Security and Net Zero’s (DESNZ) announcement on 29 August 2024 regarding a forthcoming consultation on new environmental guidance, a consequence of the Finch Supreme Court ruling.

The Offshore Petroleum Regulator for Environment and Decommissioning (OPRED) has subsequently deferred all environmental assessments, including those for the Buchan Horst project, until the consultation concludes in Spring 2025.

Adding to the climate of uncertainty, the UK Government announced on 29 July a significant increase in the Energy Profits Levy (EPL) to 38%, which raises the marginal tax rate on oil and gas profits to 78%.

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The extension of the EPL sunset date to 31 March 2030, and the proposed changes to investment allowances and reductions in capital allowances are expected to negatively impact the economics of projects like Buchan Horst, the company said in its press statement.

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As a result, NEO, which owns 50% of the Buchan Horst project and operates it, alongside joint venture (JV) partners Serica Energy (30%) and Jersey Oil & Gas (20%), has decided to materially decelerate investment across its projects.

The company, a subsidiary of HitecVision, is now seeking a licence extension to continue technical evaluations amid the evolving tax and environmental frameworks.

This investment slowdown will delay the anticipated first oil production for the Buchan Horst project, which was previously forecast for late 2027, the company added.  

The JV partners are awaiting further clarity on the UK’s regulatory and fiscal landscape before proceeding with the project’s development.