Details will need to be fleshed out, but the UK government has heard the concerns of the North Sea industry - that's what Jersey Oil and Gas PLC (AIM:JOG, OTC:JYOGF) boss Andrew Benitz told investors as Westminster began a round of fiscal consultations.
AIM-quoted Jersey and partner Dana Petroleum are poised to develop the Buchan project, which promises additional domestic gas supplies, though the project timeline is in the air amidst uncertainties over the tax regime for the North Sea.
Today, Jersey told investors in London that Dana had now released a previously contracted floating production vessel that had been earmarked for the project, as a deadline set in a prior agreement expired.
The joint venture’s ability to recommit to the contract, and therefore a project timeline, depends on the government’s fiscal and regulatory direction.
"The route to unlocking the Buchan development continues to depend on achieving satisfactory conclusions in respect of the ongoing fiscal and regulatory consultations,” Jersey CEO Benitz said on Friday.
“The fiscal consultation was kicked off yesterday and encouragingly, while the details are yet to be fleshed out, it was apparent that the government has heard many of the concerns of the industry."
Priced at 55p, the London-listed shares value Jersey Oil & Gas at around £17.5 million, nevertheless, analysts at Cavendish see the potential for the company to be worth multiples more.
Cavendish pitches its price at for Jersey Oil & Gas at a lofty 537p.
“After a period of several changes to the fiscal regime, the UK Government has recognised the importance of providing the oil and gas sector with long-term certainty on taxation,” Cavendish analyst James McCormack said in a note.
The broker noted that the government had reiterated a commitment to ending the Energy Price Levy (EPL), in March 2030 or earlier (if the Energy Security Investment Mechanism is triggered), and that, once the EPL ends, it intends to create a new mechanism that gives investors certainty over the fiscal regime.
“Encouragingly, the Government has stated that the new mechanism will be predictable and sustainable and will ensure that ‘it minimises distortions on investment decisions when prices are not unusually high,”
He added: “We take several positives from the Government consultation document, namely that the new mechanism will ensure that the sector can continue to manage existing fields and invest in the clean energy transition, and will not target revenues or profits made outside times of unusually high prices”.
McCormack also highlighted that the Government also aims to recognise post hedging realised prices.
Investors will be watching developments carefully, against a geopolitical backdrop in which domestic energy security is a priority.