PERTH, Australia — Hartshead Resources has submitted its Phase 1 concept select report for the Anning and Somerville gas field developments in the U.K. southern North Sea to Britain’s North Sea Transition Authority.
The preferred concept comprises six production wells from two wireline-capable normally unmanned installation platforms at Anning and Somerville. These platforms would connect subsea to third-party infrastructure in the area for onward transportation and processing to enter the U.K. gas network.
Hartshead now plans to move the development into the “concept define” stage with FEED expected to start in the next few months, along with preparations for project financing of the Phase 1 development. It aims to take a final investment decision (FID) in the first half of 2023.
After examining the potential impact of the U.K. Energy Profits Levy, announced last month by U.K. Chancellor Rishi Sunak, Hartshead believes it will benefit due to tax relief resulting from the associated New Investment Allowance.
Before the announcement, the U.K.’s oil and gas fiscal regime consisted of three elements:
▪ Ring-Fenced Corporation Tax – 30%,
▪ Supplementary Charge Tax – 10%, and
▪ Petroleum Revenue Tax – 0% from 2016.
The levy imposes an additional 25% tax, lifting the total combined tax rate to 65%.
However, by “super-charging” tax relief available on capex, the government may have increased the attractions of the Anning/Somerville project to potential industry partners, the company has concluded.
Following FID, the capex that Hartshead and any potential partner would invest in the Phase 1 development would benefit directly from the tax relief arising from the new investment allowance.
And the company would not be subjected to the additional 25% "windfall tax" on its Phase 1 production as due to previous years’ losses, it should not start paying tax liabilities until fiscal year 2028, sometime after the new levy is due to expire.