Neo Energy Co., Ltd. slows down the North Sea Oil Project due to temporary tax increase.

The largest oil and gas project in the North Sea has become uncertain due to the announcement by the operating company that it will slow down investment due to "financial and regulatory uncertainties."

Neo Energy had planned to start work on the Bacan Project, worth 0.9 billion pounds, in 2027, with an expected production of 0.03 million 5000 barrels of oil per day at its peak.

However, the company, which owns 50% of the project and is among the top 5 producers in the North Sea, has stated that it is currently significantly slowing down investment activities and describes the situation as "extremely challenging".

Neo Energy emphasized the government's response to the recent Supreme Court ruling and the plan of the Labour Party to raise the temporary tax as the two main reasons behind the decision.

In a recent landmark ruling, the UK's Supreme Court determined that the government and the planning committee should consider the indirect emissions from the oil field before approving the project.

In light of this ruling, the Department of Energy Security and Net Zero (DESNZ) announced plans to discuss environmental guidelines.

On the other hand, the new Labour Party government plans to raise the energy profit tax to 38% and increase the corporate marginal tax rate to 78%.

Furthermore, the party also pledged to abolish the corporate tolerance range for avoiding taxation on profits allocated to investment and exploration.

The government claims that this tax increase will be a source of funding for the goal of making the UK a "clean energy superpower," but the petroleum and gas sector in the North Sea has long warned about the adverse effects of such high tax rates on investment and employment.

On Monday, Offshore Energies UK, a leading organization in the petroleum and gas sector in the North Sea, announced the results of their analysis, stating that the government's plan could potentially wipe out £13 billion from the UK economy, but the amount of tax rate increase is lower than the previous temporary tax.

Furthermore, one week prior to that, more than 40 companies operating in the North Sea, including catering and engineering industries, signed an open letter declaring that the government's plan is a 'insensitive response' that puts hundreds of thousands of jobs at risk.

Despite aggressive lobbying, the movement of Neo Energy is one of the first well-known cases where investment has actually been reduced in response to regulatory environment.

In their statement, the company stated: 'In light of the uncertain backdrop in this sector, Neo and its 100% owner, HighTech Vision, have made the decision to significantly slow down investment activities in all development assets in their portfolio.'

'Regarding the Buchan Hound project, Neo is waiting for clarity on UK regulations and fiscal framework before fully assessing its impact.'

'As a result, it is inevitable that the start of crude oil production for this project, which was previously predicted to be in the second half of 2027, will be delayed.'

They also added that, based on this change, they are seeking an extension of the license to 'continue technical evaluation.'

Other industries argue that in the transition economy, more employment and investment will be created to compensate for the investment and employment lost in the petroleum and gas sector.

James Alexander, CEO of the UK Sustainable Investment and Finance Association, told City A.M., "North Sea oil fields are finite and already declining. If petroleum runs out, these jobs will disappear."

"However, the energy transition, including offshore wind power, will create millions of skilled jobs. The government needs to focus its ambition and investment here."