Delay on the cards for first oil from flagship North Sea project, as operator puts the brakes on investment activity while uncertainty permeates UK’s fossil fuels arena

With fiscal and regulatory uncertainty surrounding the UK, as the government ponders environmental guidance revamp for oil and gas projects, Aberdeen-based full-cycle energy business New European Offshore (NEO Energy) has decided to slow down investment plans across its portfolio. As a result, the start-up timeline for the firm’s oil redevelopment project in the North Sea may be postponed.

The decision comes after the UK government’s revealed plans for a consultation on new environmental guidance for oil and gas firms due to its conviction that such guidance is necessary in light of the recent Supreme Court ruling in the Finch case, requiring regulators to consider the impact of hydrocarbon combustion, Scope 3 emissions, in the environmental impact assessment (EIA) for new projects. The government is aiming to conclude its consultation by Spring 2025. 

Consequently, the Offshore Petroleum Regulator for Environment and Decommissioning (OPRED) has further announced that while the consultation is ongoing, they will be deferring the assessment of all environmental statements, including ones already in progress, such as the Buchan Horst project in which NEO has a 50% operated interest, while Serica Energy and Jersey Oil & Gas are the firm’s joint venture partners, owning 30% and 20% non-operated interests, respectively.

Several government measures have been announced over the past few weeks, which have materially increased the level of uncertainty concerning the UK’s oil and gas sector, thus, investment decisions in this context are “extremely challenging,” according to the North Sea operator. As a result, NEO and its 100% owner HitecVision have decided to soften materially activities across all development assets. 

In light of recent events, NEO plans to await clarity around the UK regulatory and fiscal framework regarding the Buchan Horst project, so that, the full impact can be assessed. The company confirms that this will inevitably delay the first oil from the project, which was previously forecast to be in late 2027. Previously, the first oil was slated for late 2026.

Furthermore, the joint venture partners will seek a license extension to continue technical evaluation in light of these changes to tax and environmental consents. Selecting the Greater Buchan Area (GBA) development solution and hand-picking the FPSO Western Isles for the project enabled partners to continue with the Buchan redevelopment, which is said to be the third largest pre-development field on the UK Continental Shelf (UKCS), to move forward. 

A planned set of modifications is expected to make the FPSO electrification-ready upon its redeployment, enabling the unit to be connected to one of the anticipated third-party floating wind power developments intended to be located near the GBA, thanks to the recent Innovation and Targeted Oil & Gas (INTOG) license awards made by Crown Estate Scotland.

Andrew Benitz, Chief Executive Officer of Jersey Oil & Gas, commented: “Whilst demand for hydrocarbons continues during the energy transition, homegrown energy is the right solution.  A project like Buchan has the potential to produce some of the lowest emission barrels of any project globally. 

“Emissions arising from the combustion or use of those hydrocarbons will result in the same emissions as comparable barrels regardless of where they are produced.  Homegrown energy should always trump imports, creating domestic economic growth, jobs and valuable UK tax receipts.”

Located in the Central North Sea, the GBA project covers blocks that contain the Buchan oil field and J2 oil discovery along with the P2170 license blocks 20/5b and 21/1d, which include the Verbier oil discovery and other exploration prospects.

While the first phase of the planned GBA work program entails the redevelopment of the Buchan field, the subsequent phases are expected to involve the tie-back of the Verbier and J2 discoveries that lie within the GBA license area and the potential for regional third-party discoveries to be tied back to the FPSO.