DANISH oil firm Maersk disrupted the recent trend of companies withdrawing from the North Sea yesterday, as it announced a £3bn investment into a new project in the region.
The company has received approval from the UK Oil & Gas Authority to develop a high pressure, high temperature (HPHT) gas field in the UK central North Sea, the largest new field discovered in the region for a decade, according to Wood Mackenzie. Maersk, along with BP and JX Nippon, will invest around £3bn in developing the Culzean field. The project is expected to create more than 400 jobs and support up to 6,000.
The Treasury said the project has been "supported by the HPTP cluster area allowance" introduced by the government earlier this year - the allowance exempts 62.5 per cent of a firm's profits from the supplementary charge that all firms producing oil and gas in the UK must pay.
Analysts welcomed the departure from the recent stream of firms leaving the North Sea. "While the focus has been on uneconomic wells at current prices as well as high decommissioning costs, others are seeing opportunity," said RFC Ambrian's Jonathan Williams. "It's certainly a vindication of the revised fiscal regime."
And Mark Guest at Rigzone told City A.M.: "The tax breaks were designed to help developers unlock the potential of projects like these. This is hopefully the start of more similar announcements."
However, FirstEnergy's Stephane Foucaud said the new project was "making more noise this time simply because there are not many new projects being sanctioned". Foucaud also warned that while the tax breaks were a sign that the government is "responding rationally to a basin that's maturing and a structure where the oil price is going down", they would not remain at current levels long-term.
"As the oil price goes up, tax and costs go up, as the oil price goes down, tax and costs go down. That's what we see over and over in the cycle, and it's what we are seeing this time around," he added.