By Scott Wright

JERSEY Oil & Gas has declared investor interest in its flagship North Sea project has been bolstered by “favourable fiscal and macroeconomic developments.”

The company has in recent years been working up the Greater Buchan Area hub in the Central North Sea, which is estimated to be the third-largest oil development opportunity in the UK Continental Shelf.

And yesterday it said interest among potential investors in the farm-in process has been bolstered by changes to the wider economic backdrop.

Russia’s ongoing war on Ukraine has caused commodity prices to remain at elevated levels, boosting the profits of oil and gas majors and leading to fresh efforts at Westminster to enhance UK energy security.

READ MORE: Is it wrong to write Glasgow off as the city struggles in wake of pandemic?

This has raised the prospect of a revival of investment in North Sea exploration and hydrocarbon extraction, with the UK Government confirming yesterday its support for a new oil and gas licensing round, which is expected to be launched in early October. More than one hundred exploration licences are expected to be issued in a bid to boost domestic energy production.

Jersey told the City yesterday that “substantial progress” has been made on the GBA farm-in process, with the majority of interested parties expected to complete their technical due diligence next month. It added that commercial discussions with potential counterparties are taking place.

Jersey holds licensed acreage estimated to contain 172 million barrels of oil in the Central North Sea. This includes operatorship and 100 per cent working interests in licence blocks containing the Buchan oil field, on which it is looking to resume production, and the J2 oil discovery. Its interests also include licence blocks containing the Verbier oil discovery and other exploration prospects.

READ MORE: US banking giant shows commitment to Glasgow as move to new base nears

Chief executive Andrew Benitz said: “Great progress is being made with our GBA farm-out process – the key activity for the group in 2022. Interest is strong, technical studies across the various development solutions are well advanced and commercial discussions are ongoing with serious, well-funded counterparties.

“Since launching the process, the company’s engagement strategy has been broadened to advance a range of competing development solutions, thereby increasing optionality.”

The alternative solutions include tiebacks to existing platforms and the re-use of available floating production, storage and offloading vessels, Jersey said.

The company also said the different development solutions for the GBA currently being assessed have the potential to form part of the future Outer Moray Firth offshore wind electrification plans currently being considered as part of the Innovation and Targeted Oil and Gas leasing round process. It noted that it had recently provided a leading offshore wind developer with a letter of support as a potential power user to assist with its application for a lease in the forthcoming offshore wind licence round.

READ MORE: Monday Interview: Retail chief Thompson is back to where it all began

The INTOG is aims to promote further development of offshore wind while helping to decarbonise the UK’s oil and gas sector. It was launched by Crown Estate Scotland in August for smaller-scale wind projects following its ScotWind licensing round earlier in the year.

Mulling the outlook for the oil and gas sector, Jersey chairman Les Thomas and Mr Benitz said yesterday that the pandemic and war in Ukraine have “masked the underlying issue that is challenging the upstream sector – namely, a looming supply crunch.”

The pair stated that the industry has been “starved of capital since 2015 and this has led to chronic underinvestment”, while also underlining the role that the oil and gas industry is playing in the energy transition. “It must be managed appropriately as hydrocarbons continue to provide the world with approximately 80% of its daily energy supply,” the company leaders said.

“Unfortunately, inflationary pressures resulting from a restricted energy supply are already being seen and, in turn, the even more concerning prospect of energy poverty. The world needs urgent and responsible investment upstream to address the supply shortfall against a backdrop of significantly increasing global demand for energy. Consumers, industry and Governments deserve access to affordable energy to go about their lives during the energy transition.”

They add: “It will take time for the supply side to increase, and in the meantime continued high oil prices are highly likely.”

Jersey said the windfall tax imposed by the UK Government on the extraordinary profits being made by oil and gas companies had “caught the industry off guard”. However it said the “silver lining” was a “generous investment allowance” introduced alongside the measure.

Shares in Jersey closed down 10.2p, or 4.3%, at 226.3p.