Chevron to sell UK North Sea assets as it exits ageing oil basin

Chevron will sell its remaining UK North Sea oil and gas assets, bringing an end to more than 55 years of operations in the region.

The US oil major said the decision to leave the North Sea was not related to the UK tax regime, where energy companies pay 75 per cent of tax on profits or to the opposition Labour party’s plans to increase the fuel levy. Labour has a big lead in opinion polls ahead of a general election expected this year.

Instead, Chevron said it had reviewed its global portfolio “to assess whether assets are strategic and competitive for future capital”. The decision was first reported by Reuters.

Chevron is the latest oil major to leave the ageing basin as they focus on newer oilfields around the world. ExxonMobil said it had sold most of its North Sea assets for about $1bn in 2021, while BP and Shell have both sold down their portfolios.

Chevron previously sold its interest in the Rosebank field to Equinor in 2018 and about $2bn of other North Sea assets in 2019 to Ithaca Energy, before the latest windfall taxes on the region came into force.

Although Chevron stressed its decision was not linked to taxation, Chris Wheaton, oil and gas analyst at Stifel, said “the threat of an additional tax is creating a hostile environment for investment [in the UK continental shelf] and Chevron has other assets to invest in”.

Harbour Energy, the biggest producer in the UK North Sea, in December agreed an $11.2bn deal to buy Wintershall Dea’s oil and gas assets from Germany’s BASF, a transaction that will reduce dependence on the UK to about a third of production from about 90 per cent.

The latest sale will include Chevron’s 19.4 per cent stake in the BP-operated Clair oilfield, the largest in the North Sea with a production of 120,000 barrels per day. The stake is worth about $1.1bn, according to Wood Mackenzie, the energy consultancy.

It will not impact Chevron’s other operations in the UK, including its international headquarters in London and a technology centre in Aberdeen.

Chevron has said it would sell between $10bn to $15bn in assets as part of its planned acquisition of US energy group Hess, which is being held up by a legal fight with ExxonMobil over assets in Guyana.

The industry’s prospects are likely to feature in election campaigning in Scotland ahead of the UK general election this year as the Scottish National party seeks to ward off challenges to its dominance in the region. The Conservatives are also seeking to cement support in north-east Scotland.

The Labour party has proposed increasing the total tax rate to 78 per cent and removing tax relief on new projects, which it has described as a loophole.

Claire Coutinho, UK secretary for energy security and net zero, this week said Labour’s plans will “push Britain into the energy dark ages, resulting in a £20bn black hole in the public finances and the loss of 200,000 jobs”.