BP begins £3BN investment into North sea despite Osborne’s tax grab

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BP has began one of the largest investments in the North Sea for years to redevelop two huge fields west of the Shetlands, Schiehallion and Loyal,  despite Chancellor George Osborne’s tax grab earlier on this year.

The oil giant said the tax raid would hit profits, not making the “decision any easier” to go ahead with the investment, but that the “size and scale of this development means we are able to progress”.  BP shares rose by 3¼p to 456½p.

BP cautioned however that a “higher tax regime could render certain future stages of the drilling uneconomic” and said oil industry concerns remain over developments of new oil and gas fields as well as smaller fields.

BP’s partners in the project include Royal Dutch Shell, Hess, Statoil, OMV and Murphy Petroleum.

The £3BN will be invested in a new floating production, storage and offloading vessel, capable of getting the oil up from the seabed and storing it until it’s transferred to oil-tankers.  The vessel can process 130,000 barrels of oil per day, and store more than 1 million barrels at a time.

The investment ensures the two fields can continue production to 2035 and beyond, securing hundreds of jobs.  Schiehallion and Loyal have so far yielded 400 million barrels of oil since production started in 2008.  BP estimates there are a further 450 million barrels still to be exploited.