Serica warns energy profits levy could hamper North Sea projects

The boss of another large North Sea oil and gas producer has warned that a “punitive” tax regime will hamper its plans to invest further in Britain.
Chris Cox, the chief executive of Serica Energy, also confirmed that the company was looking at acquisitions outside the North Sea.
Last week Amjad Bseisu, who runs Enquest, said the Energy (Oil and Gas) Profits Levy was putting billions of pounds of spending plans at risk. Cox, 63, echoed that concern while highlighting that Serica had spent about £1 billion throughout the UK supply chain over the past five years.
The energy profits levy was introduced by Boris Johnson’s government and was expanded when Rishi Sunak was in Downing Street. Rachel Reeves, the chancellor, is set to raise the levy’s headline rate by three percentage points to 78 per cent and to extend the period in which it applies by 12 months until March 2030. She is expected to provide further details about areas such as capital allowances in her first budget on October 30.
Cox also pointed to a recent decision in the Supreme Court as another issue on which more clarity was needed. The ruling in the case of R (Finch) v Surrey County Council says that regulators must consider the impact of burning oil and gas extracted from fields as part of the environmental impact assessment for new projects.
According to Cox, the Buchan project, in which Serica is involved alongside Neo Energy and Jersey Oil & Gas, could be affected. The consortium has already pushed back a final investment decision until it has greater certainty about the fiscal and regulatory regime.
Cox said that maintaining full allowances for capital investment and a sustainable financial backdrop were “crucial for the future of investment into the domestic oil and gas sector. These investments are needed not only for new fields, but also to extend the life of current operations and are the lifeblood for companies in our supply chain across the UK.
“Serica has spent over a billion pounds in the UK supply chain over the last five years and similar expenditures will be lost going forward should the tax regime make future investment uneconomic. Investment sustains production and ultimately increases government tax revenues, supports the ability of companies in the North Sea ecosystem to play their part in the UK’s energy transition and limits global emissions by lessening the need for higher-carbon imports.”
Serica’s interim results showed that its production had dropped by 11 per cent to be equivalent to 43,700 barrels of oil per day in the first six months of this year. Unscheduled maintenance at its Triton hub is likely to mean that the full-year result is towards the lower end of forecasts for between 41,000 and 46,000 barrels daily.
Interim revenue of $462 million was down from $545 million, affected by lower gas prices and the drop in production. The pre-tax profit was $188.5 million, compared with $267.9 million previously.
Serica was hit by $106 million of tax charges in the period, against $169 million in the first half of 2023 The interim dividend for January to June this year was flat at 9p and the company is considering a move from the Aim stock exchange to London’s main market.
Cox confirmed that Serica was still interested in North Sea deals, but said that it was screening options “in other geographies. I also want to be clear we have not given up on the UK. Depending on the fiscal regime, there may be very attractive growth opportunities.”
Serica continues to talk to the government on taxation and Cox added: “We are still working very hard at that. We are lobbying, working with industry peers, industry bodies and unions. We are doing everything in our power so that we have a sensible outcome on tax.”
Shares in Serica Energy closed down by 2¼p, or 2 per cent, at 114¾p.