"Harbour Energy Eyes U.S. Listing Amidst North Sea Exit Strategy"
A significant shift is occurring in the North Sea oil sector, as leading UK producer Harbour Energy seeks to divest its stakes in several North Sea oil fields. Simultaneously, the company is reviving efforts to seek a listing in the US amid industry players' reactions to impending tax hikes in the UK.
Since assuming office in July, the Labour Party government has proposed tax increases on the oil and gas sector to fund renewable energy projects. Finance Minister Rachel Reeves is set to detail these changes on October 30. Additionally, the government is working on new environmental guidelines for oil and gas projects, which could further complicate investment in the North Sea, where production has fallen 75% since its late 1990s peak.
Harbour Energy aims to acquire a US-listed company, a move that would facilitate its US listing and potentially allow it to relocate its headquarters. This plan, temporarily shelved last year due to Harbour’s $11 billion acquisition of Wintershall Dea’s non-Russian assets, has been renewed following the deal's completion last month.
The company has launched a sale process for its stakes in the Armada, Everest, Lomond, Catcher, and Tolmount fields as part of its strategy to reduce its North Sea presence. However, Harbour declined to comment on the sale process, emphasizing its focus on integrating Wintershall Dea’s assets.
The UK North Sea sector has been under pressure due to tax changes. The previous Conservative government introduced a 25% Energy Profits Levy in May 2022, later increased to 35% in November 2022 and extended in March 2024. The current Labour government plans to raise this tax from 35% to 38% starting November 1, resulting in a combined tax rate of 78% on oil and gas activities, one of the highest globally. This tax rate is expected to remain until March 2030, and the investment allowance permitting tax relief for reinvested capital will be eliminated.
Industry representatives have expressed concerns over the investment climate in the North Sea. Serica Energy's Chairman David Latin stated that without a reasonable fiscal regime, the UK North Sea is unattractive for investment. The Treasury highlighted the government's commitment to making the UK a clean energy leader, expecting the oil and gas sector to contribute to this transition.
TotalEnergies CEO Patrick Pouyanne announced earlier this month the cessation of exploration activities in the North Sea, citing a challenging political environment. Similarly, Neo Energy and Japan Petroleum Exploration (Japex) indicated a slowdown in investments and initiated sale processes for their North Sea interests.
Deltic Energy CEO Andrew Nunn, who on Monday announced plans to cut spending, advised investors against investing in the UK. The industry's response to tax changes and environmental policies suggests a broader withdrawal from the North Sea as companies seek more favorable conditions elsewhere.