Major North Sea company 'slows down' investment at £900m oil field over 'openly hostile' windfall tax

Labour has been accused of being “openly hostile” to the oil and gas sector after a lead developer announced it would curb investment over windfall taxes and the potential introduction of more stringent emissions rules.

NEO Energy announced on Monday it was slowing down investment activities due to UK fiscal and political instability.

Labour’s increase to the energy windfall tax has been branded 'openly hostile'. Picture: Getty Images

The operators of the £900 million Buchan Horst development said in light of the UK government’s recent announcements regarding the Finch ruling, which requires regulators to consider the impact of burning oil and gas, the project’s “consultation is not expected to conclude until spring 2025”.

In a statement, NEO energy said: "In recent weeks the government has announced a number of measures which have materially increased the level of uncertainty in relation to the UK’s oil and gas sector, and investment decisions in this context are extremely challenging.

"Against this uncertain backdrop, NEO and its 100 per cent owner HitecVision have taken the decision to materially slow down investment activities across all development assets in its portfolio.”

Increased windfall taxes on the UK's offshore oil and gas industries would cost the sector about £13 billion over the next five years and lead to a fall in tax receipts, a trade body has warned. Picture: Andrew Milligan/PA Wire | Andrew Milligan/PA Wire

Labour has lifted the windfall tax to 38 per cent, taking the headline rate of tax for oil and gas companies to 78 per cent, while also cutting investment allowances.

Scottish Conservative shadow secretary for net zero, energy and transport Douglas Lumsden claimed his party’s warnings were now being borne out.

He said: “We warned the Labour government that their short-sighted decision to abandon oil and gas would be devastating for the sector and the tens and thousands of skilled workers who rely on it.

 “Those fears are now being borne out, and we have a major North Sea producer announcing they will slow down their investment in the industry. These employers can see – as Labour’s failure to fight the legal challenge to the Rosebank and Jackdaw projects proves – a government that is openly hostile to the sector. 

“As well as devastating North East communities and endangering our energy security, Labour’s stance is undermining the drive to net zero because the major oil and gas producers are leading much of the investment in renewables.”

It comes as the SNP accused Labour of “abandoning” Scotland’s oil and gas industry and threatening the just transition after figures published by an industry body showed its windfall tax plans will cost the economy £13 billion and put up to 35,000 jobs at risk.

Offshore Energies UK analysis claimed the planned increase and extension of the levy would risk losing £12bn in tax receipts and an overall loss in economic value of around £13bn.

SNP MSP Kevin Stewart said: “The North East has the potential to be the global net zero capital, but the Labour Party’s reckless plans put this opportunity at risk. Having already dumped their £28bn investment pledge, its windfall tax plans put up to 35,000 jobs at risk.

“Make no mistake about it, Labour is abandoning the oil and gas sector in Scotland – putting tens of thousands of jobs at risk and threatening our just transition.

“A just transition – for workers, for communities and for our economy – is vital, but under Labour this is under threat.”

An HMT spokesperson said: “We are committed to maintaining a constructive dialogue with the oil and gas sector to finalise changes to strengthen the windfall tax, ensuring a phased and responsible transition for the North Sea.

"Our plans for a new National Wealth Fund and Great British Energy will create thousands of new jobs in the industries of the future.”