BG Group has hinted that it is ready to create thousands of jobs with a new £2.4billion North Sea development – if George Osborne can get the tax regime right.
The oil and gas explorer – which yesterday reported a 33% drop in full-year earnings – revealed that it is in talks with the UK Treasury about its Jackdaw discovery off Aberdeen.
Chief executive Chris Finlayson said that the firm sees the huge field as its “next potential investment” if the right incentives are there.
His comments come amid mounting pressure on the chancellor over the taxes he levies on offshore companies.
Mr Osborne stunned the producers in 2011 with his now-infamous £10billion tax raid.
There was an angry backlash from the industry, and since then he has tried to restore confidence with new field allowances and contracts guaranteeing tax breaks for decommissioning North Sea assets.
But just weeks ago industry body Oil and Gas UK warned that the basin faces an “exploration crisis” if Westminster fails to step up its support.
Asked whether BG Group continued to have confidence in the North Sea and its fiscal viability, Mr Finlayson said they were “committed” to the region.
“In terms of the UK North Sea, clearly the next potential investment for us is the Jackdaw field, and there are discussions ongoing with the UK Government as we speak about the necessary incentive basis to make that happen,” he said.
“We remain committed to the UK North Sea. It remains an attractive production that we want to maintain and we want to find opportunities for further investment there.”
The Treasury remains coy about any new measures to boost exploration, stating: “We don’t give detailed commentaries on what we are or aren’t looking at around the Budget.”
BG Group has extensive business interests in the North Sea.
It operates the Armada, Everest and Lomond platforms; has major non-operated interests in the Buzzard, J Area, Elgin Franklin fields and CATS pipeline; and is pursuing an active exploration and development programme to deliver future growth.
Jackdaw alone could yield 165million barrels.
However, troubles abroad are weighing heavy on its bottom line.
Sharp declines in the value of its Egyptian gas and US shale businesses have led to full-year earnings falling by a third.
Writedowns of £1.47billion – which triggered a surprise profits and production warning last week – pushed the FTSE 100 firm into a fourth-quarter post-tax loss of more than £670million.
While earnings fell by a third, profits were down just 5% year on year at £4.65billion.
And despite problems around the world, the company is continuing to grow in the UK.
A spokesman said: “In the North Sea we achieved our key milestones during 2013 and grew production by 4%. Output was helped by strong performances from the Buzzard field, in which we have a major interest, and by the Armada asset.
“We anticipate further production growth during 2014 and 2015 and are working hard to develop new hubs in the central North Sea and in Norway to provide a platform for longer term growth.
“We also plan to accelerate exploration in both the UK and Norway.”