After warnings the windfall tax would spark an exodus of oil firms from the North Sea the basin won votes of confidence from bitter critics of the levy before Labour threw fat on the fire last week.

While 2023 was dominated by claims that the tax imposed the preceding year would cut returns on North Sea investment to the bone, major players in the area have made clear recently that they still see potential to make lots of money in the area.

Signs of continued enthusiasm were evident in what may have looked like unlikely quarters last month when the supplementary results of the latest North Sea licensing round were announced.

Firms that applied successfully for new acreage included some of the noisiest critics of the tax, which was imposed after the surge in oil and gas prices fuelled by Russia’s war on Ukraine helped firms generate record profits.

The awards were announced days before Labour sparked fury by saying it would increase the windfall tax rate and scrap related allowances if it wins the general election that must be held within months.

The fear is that the prospect of a fresh tax hike may make firms that appeared to be rediscovering their enthusiasm for the North Sea think again although the outlook for investment in the net zero drive looks uncertain.

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Labour announced plans for the windfall tax hike the day after dropping its proposal for a £28bn green investment drive, which it decided had become unaffordable.

Of the 17 companies offered licences in the supplementary round TotalEnergies appears to have done particularly well. The French giant was awarded 10 blocks West of Shetland.

The company hit the headlines in December 2022 after announcing that it would cut North Sea spending by 25 per cent, from £400m. It made the move shortly after the Conservative Government increased the rate of the windfall tax to 35%, from an original 25%. That took the total rate payable to 75%.

Labour wants to increase the rate to 78% in line with Norway and to extend the term of the charge by a year, to 2029.

The supplementary awards announcement shows US giant Apache was offered an additional North Sea exploration block, on the basis that it will drill a well by an undisclosed  deadline or drop the licence.

Apache caused dismay in Aberdeen in June last year after suspending all North Sea drilling, in a move that resulted in hefty job losses.

The company, which operates the giant Beryl field, complained then about the challenging UK macro environment with its “increasingly costly and burdensome tax and regulatory regime”.

“Given the business climate for the oil and gas industry in the UK, these assets have become less competitive in comparison to the rest of our portfolio,” it said.

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Another windfall tax critic highlighted the exploration potential it saw on the North Sea after applying successfully for acreage in the supplementary round.

The Parkmead E&P venture was offered a licence covering three blocks on a drill or drop basis. Parkmead is run by renowned oil and gas entrepreneur Tom Cross who built Dana Petroleum into a £1.9 billion business.

Parkmead said the new licence contains seven undeveloped discoveries including Fynn Beauly, which it described as one of the largest undeveloped oil accumulations in the UK.

In June Mr Cross said Parkmead had been required to re-evaluate its strategy as the UK North Sea upstream industry faced “unprecedented challenges” associated with volatile oil and gas prices, ageing infrastructure and rising costs.

“This, combined with the sharp increases in taxation in the last 12 months and the loss of key equipment and human resources from the UK North Sea, has resulted in a large number of drilling campaigns and investment decisions on new field developments being delayed, curtailed or cancelled,” he complained.

The Dana Petroleum business, which Mr Cross sold to Korea National Oil Corporation in 2010, was awarded licences covering six blocks in the latest round.

Dana last week underlined its faith in the exploration potential of the North Sea again by acquiring a stake in a bumper gas prospect from Deltic Energy, which made a big find with Shell last year.

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The supplementary awards were announced three months after the initial results confirmed the round had won a very strong response.

Firms awarded licences in October included TotalEnergies and fellow majors Shell and Equinor.

Shell also enjoyed success in the supplementary awards. It will partner TotalEnergies on the 10 blocks West of Shetland and work on another on its own account.

The strong response to the licensing round appears to make clear that oil and gas firms expect to make plenty of money in the North Sea even after paying the bills associated with the existing windfall tax.

It was notable that the Government appeared ready to call oil firms’ bluff when it released the results of a review of the North Sea fiscal regime in November. It confirmed then that the levy was expected to remain in place until March 2028 unless the price floor mechanism introduced in June is triggered. This will only happen if prices drop well below the levels seen in recent months.

Prices have fallen from the peaks reached in 2022, amid concerns about the outlook for the global economy. However, results announcements made by majors in recent days showed firms are still making huge amounts of money.

Shell and BP posted profits of $28bn (£22bn) and $13.8bn respectively for 2023.

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Bosses of both firms made clear that they expect demand for oil and gas to remain strong for years and indicated that the North Sea remains an important area of operations.

In Shell’s results presentation the company highlighted the impact of the revamp of the giant Pierce field it completed last year under the heading ‘longevity’.

Last month Shell approved the development of the Victory gas find off Shetland. Shell acquired control of Victory in a £32 million deal with Reabold Resources struck five months after the windfall tax was imposed.

New BP chief executive Murray Auchincloss last week confirmed that BP will continue to invest heavily in oil and gas in coming years. The company expects to use the money it makes from oil and gas sales to fund investment in lower carbon energy sources and big payouts to investors.

In a presentation to analysts, Mr Auchincloss confirmed that BP is still considering plans for a further extension to the massive Clair Ridge development off Shetland that would entail huge investment.

Coming months after Equinor approved plans to develop the massive Rosebank field West of Shetland such comments suggest the Government’s decision to introduce a generous investment allowance alongside the windfall tax may be paying off.

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In making its pledge to scrap the allowance Labour may hope to win votes from those that claim that oil and gas firms will hog the benefits that result from any resulting production increases. It has also said it won’t issue new North Sea licences but will respect those that are in place when it takes power.

Industry body OEUK has warned that Labour’s plans would put thousands of jobs at risk and undermine the UK’s energy security drive.

The Norwegian experience shows that firms can live happily with a 78% tax rate. Could some decide to bring forward plans for investment in the UK North Sea to secure the benefit of allowances that may not be available if Labour takes power?