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US oil giant quits North Sea as Hunt refuses to scrap tax

Jeremy Hunt
Hunt points to Labour's tax policies as the key deterrent to investors. - Hollie Adams/REUTERS

The US oil giant Chevron has announced it will quit the North Sea after 55 years, the day after Jeremy Hunt turned down industry pleas for support at a private meeting.

Chevron said that it had decided to leave the region following a review of global operations to determine “whether assets are strategic and competitive for future capital”. The company insisted this was not connected to Britain’s tax regime.

It came a day after Mr Hunt rejected calls for respite from a windfall levy that has driven up the tax on oil profits to 75pc.

Industry leaders told Mr Hunt that there was “one last chance” to halt a “catastrophic” decline in investment in UK waters that risks reducing oil and gas output by at least 50pc by 2030.

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However, the Chancellor is understood to have made no promises to change tack – pointing out that Labour’s threats to increase the windfall tax by another 3pc and to cut investment allowances should they win the election, were the key deterrent to investors.

The meeting was attended by most of the North Sea’s major operators, including Shell, BP, Harbour Energy and Ithaca Energy.

Chevron was not in the room but was briefed on the outcome by industry body Offshore Energies UK. The company claimed the timing was coincidental.

A spokesman said: “Chevron’s announcement is not related to recent announcements relating to the UK windfall tax. The announcement relates to assessing a global portfolio that provides best shareholder return.”

Chevron is the world’s third-largest oil company and is one of the last major players still in the North Sea. Exxon left in 2021 and others such as Shell and BP have sold off many of their assets.

The company is to sell its 19.4pc stake in the Clair Field, which is 50 miles off the coast of Shetland and is the largest in UK waters with an estimated eight billion barrels of oil extending over 85 square miles.

It will also dispose of 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 raise between $800m (£633m) and $1bn once a buyer is found.

Chevron was among the first oil companies to drill in the North Sea in the 1960s, but has since pulled out of exploration and production after offloading its drilling assets in 2019.

Analysts say that the North Sea’s output is already in decline because the biggest oil and gas fields have been drained – so finding and extracting what remains is already becoming more expensive.

They warn that burdening the industry with extra taxes is bound to be a deterrent to further investment – pointing to a similar cutback by Harbour Energy, the UK’s biggest oil and gas producer, which has halted all North Sea investment.

Chris Wheaton, an analyst at Stifel, published a new analysis of the North Sea’s prospects on Wednesday entitled: “Will the last energy company to leave the North Sea please turn off the lights.”

It warned that windfall taxes risk accelerating the decline of North Sea oil and gas production so fast that output will fall by up to 70pc by 2030, leaving the nation increasingly reliant on imports.

Criticising the windfall tax, and Labour’s plans to increase it, he said: “Loss of investment means loss of jobs and skills for the energy transition.”

Mr Wheaton suggested 100,000 of the 200,000 jobs linked to the industry were at risk of disappearing by 2029, with the UK importing 80pc of its gas before the decade is out.

A Government spokesman said: “No one is backing the oil and gas industry more than the Government. Our annual licensing rounds are supporting around 200,000 jobs, giving them certainty to invest and unlocking billions in tax for our own transition to clean energy.

“The temporary windfall tax on oil and gas firms actively encourages investment to create jobs and grow the economy – the more investment they make the less tax they will pay.”