While Liz Truss appears to have bowed to warnings that tax increases could threaten investment in the North Sea, evidence suggests the levy imposed by her rival in the Conservative party leadership race has not dented enthusiasm for the area.

Rishi Sunak angered some of the Tory faithful in May when he announced the introduction of what he termed an energy profits levy in response to the massive increase in the profits earned by oil and gas giants in recent months. This followed the surge in prices fuelled by Russia’s assault on Ukraine which left consumers facing huge increases in energy bills.

After insisting handouts were not the answer, Ms Truss announced a package of reliefs which include a £2,500 cap on the bills of average households for two years.

Last week Ms Truss also unveiled a plan to cut the prices paid by businesses by half. She will fund the related costs through borrowing. It is thought the relief schemes could cost £150 billion or more.

Labour had advocated increasing the 25 per cent levy imposed by Mr Sunak to help bolster the public finances. This would be along the same lines as EU proposals to impose a “solidarity contribution” on the excess profits made by oil and gas firms amid the war in Ukraine, which is expected to raise around £120bn.

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Ms Truss said such a move could frighten firms away from the North Sea at a time when the UK needs to reduce its reliance on imported gas – an argument that comes straight out of the industry's PR manual.

In its latest economic report industry body OEUK (Offshore Energies UK) said this month the Energy Profits Levy “has significantly impacted investor confidence, and risks handicapping long-term UK investment”. OEUK reiterated calls for the levy to be ended by 2025 at the latest, as suggested by Mr Sunak.

However, a range of firms have made clear they see great appeal in North Sea projects in spite of the tax increase announced by Mr Sunak. Along with the profits levy, he also introduced a generous new investment incentive which critics have said less about.

In August Norway’s Equinor announced plans to develop the massive Rosebank West of Shetland, which could entail £8bn of investment. And this month lesser-known players have shown enthusiasm for North Sea investments in announcements that may largely have gone unnoticed outside the industry.

Reabold Resources is set to scoop a big payout under a deal in which an unnamed “oil and gas major” will pay up to £32 million to secure control of the Victory gas find West of Shetland, which has lain undeveloped since it was discovered in 1977.

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The major concerned will gain control of Victory by acquiring Corallian Energy. Reabold is set to net £12.7m for its stake in Corallian after investing £7.5m in the firm since 2017. It is buying Corallian’s other North Sea interests, apart from Victory, for £250,000.

Announcing the deal, Reabold highlighted the positive prevailing market dynamics and the UK's focus on energy security, which it said was “very supportive of asset development opportunities”. Chief executive Stephen Williams said the company could help improve the UK's energy security by unlocking the potential of currently under-appreciated assets.

The economics of Victory have improved with the development of the giant Laggan and Tormore gas fields by France’s TotalEnergies. This involved installing infrastructure that Victory could be linked to.

The North Sea contains a range of other finds that may look much more attractive under current conditions than when they were first discovered.

News of a potential deal involving Corallian first broke on May 4, three weeks before Mr Sunak announced his windfall tax plans. The former Chancellor’s move may have created complications in areas such as pricing but these were clearly not sufficient to derail the Corallian deal.

The day before Reabold confirmed the Corallian deal had been agreed, North Sea-focused Deltic Energy signalled that City investors were keen to get exposure to gas assets when it announced a £15m fundraising through a placing that was “significantly oversubscribed”. The funding will support work on a portfolio of exploration prospects that has attracted interest from the mighty Shell, which appears undimmed following the introduction of the energy profits levy.

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In July Deltic, formerly known as Cluff Natural Resources, announced that Shell had confirmed plans to drill a well on the Pensacola gas prospect off north-east England. Shell bought a stake in Pensacola in 2019 from Cluff in a move that appeared to vindicate the firm’s decision to refocus on North Sea exploration amid the downturn that started in 2015.

In July 2020 Deltic rebuffed a £12m bid approach from Reabold Resources, claiming it undervalued the company.

Meanwhile a North Sea firm aiming to revive a giant field off Scotland has said favourable fiscal and macroeconomic developments have boosted interest in its plans. Jersey Oil & Gas has been seeking partners to help it bring the Buchan field back onstream, which will involve developing a major production facility in the Moray Firth.

Buchan was shut down in 2017 after former operator Repsol Sinopec decided to decommission the associated production facilities. Jersey thinks it still contains around 130 million barrels.

In an update issued last week Jersey said it was in “continued active engagement with multiple counterparties” after the introduction of the Energy Profits Levy had made some firms question their North Sea investment strategy. Jersey did not name any of those concerned.

The levy will weigh most heavily on firms that are focused on production. However, Jersey indicated the new investment allowance could be a game-changer in terms of field developments.

It told investors the “silver lining” in Mr Sunak’s cloud was the introduction of a generous investment allowance, noting: “A full taxpayer in the North Sea now has the ability to secure 91% tax relief through investing into new projects, essentially meaning that for a cost of only 9p a company can get £1 of investment value.”