BP quits North Sea after tax grab
BP will sell its North Sea oil division after the government’s tax raid on domestic oil, in a move that will leave the British energy giant without any petrochemicals production in its home market for the first time in decades.
The London-listed oil giant told investors it planned to market its assets in the region as part of a major restructuring being overseen by boss Meg O’Neill.
O’Neill had previously announced plans for a vast overhaul of the energy major in which the group’s structure will be split into two divisions – upstream and downstream – and focus purely on the company’s most profitable assets.
As part of the push, BP has already offloaded its lubricant division Castrol and a host of its less productive gas assets and is targeting $20bn (£14.9bn) of divestments by the end of this year.
“The UK has been our home for more than 100 years and will continue to play an important role in our future,” O’Neill said on Friday, adding: “However, as we focus our portfolio and direct capital to our highest-value opportunities, we believe our North Sea business will be better positioned as part of another company. “
BP restructuring gathers steam
The decision follows months of speculation that BP’s domestic oil arm might become part of the energy major’s streamlining drive given the tax environment makes it one of the least financially attractive drilling regions in the world.
BP is currently one of the largest operators in the North Sea. It has stakes in roughly 20 fields in the region. But despite the windfall from higher energy prices due to the Iran war, the area has become an increasingly challenging operating environment thanks to years of windfall taxes and a ban on new drilling.
O’Niell added: “We’re proud of the jobs we create, the contribution we make to the UK economy, and the work we do to keep energy flowing every day.
“It has world-class people, resilient assets and a proud heritage, and it is precisely these qualities that can attract an owner ready to back its next chapter. We are seeking an outcome that recognises that value.”
The move comes at a tumultuous time for BP, which suddenly ousted chair Albert Manifold after “serious concerns” about his behaviour were raised with its board. Manifold, who had only been in place for a year, had been the architect of the energy major’s simplification drive, and oversaw the appointment of O’Neill to return the company to its legacy focus on petrochemical drilling and trading.
The decision took much of the Square Mile off-guard, and sparked an almighty boardroom spat in which the former CRH boss denied the bullying charges, and accused BP top brass of lying.
Despite the war of words, the group’s turnaround strategy has begun to bear fruit. It doubled its profit in the first three months of this year and analysts expect it to post similarly positive results when it reports its half-year earnings next week – thanks largely to the ongoing conflict in Iran.
Russell Borthwick, chief executive of Aberdeen and Grampian Chamber of Commerce, said that BP’s decision to quit the North Sea should be “a defining moment”.
“How many more jobs need to be lost before the UK Government acts?” he added. “This decision is another stark reminder that confidence in the UK continental shelf has been badly shaken after years of policy uncertainty, punitive taxation and mixed messages about the future of the industry.”
Keir Starmer’s government banned all new oil and gas exploration in the North Sea as part of its flagship drive to become a “clean energy superpower”. Andy Burnham has since suggested he might partly overturn that decision, and push through licenses for the Jackdaw and Rosebank projects that have been held up in the courts for years.