Israeli-owned oil giant poised to dominate British North Sea drilling
An Israeli-owned drilling company is poised to become the UK’s largest North Sea oil and gas operator after announcing a tie-up with Italian rival Eni.
Ithaca Energy would take over four key production hubs under the terms of the agreement, the Elgin Franklin, J-Area, Cygnus and Seagull platforms.
It would also assume control of Neptune Energy, a major North Sea player acquired by Eni earlier this year.
If the deal goes through it would leave Ithaca with stakes in six of the 10 largest fields in the UK North Sea.
The business would be in control of a significant chunk of the UK’s gas supplies, including the fields that help supply London and southern England.
Ithaca said the deal would add significant scale and diversification to its business, nearly doubling oil and gas production to more than 100,000 barrels a day.
Israeli-owned Ithaca has four weeks to decide if it wants to confirm the deal. If it goes ahead, Ithaca would issue new shares to Eni, which would own a 38pc to 39pc stake in Ithaca.
Ithaca has previously clashed with the SNP over the development of new oil fields. Last year, then-chief executive Alan Bruce wrote to first minister Humza Yousaf to say he was “extremely disappointed” about the party’s opposition to the Rosebank project.
Ithaca’s major shareholder, Delek Group of Israel, would retain more than half the shares in the enlarged business. Ithaca said: “Although the discussions are at an advanced stage, there can be no certainty that a potential combination will occur.”
Ithaca is listed in London but Delek owns an 89pc stake.
Gilad Myerson, executive chairman, said: “We believe this potential combination would be a strong strategic fit with Eni UK’s cash generative portfolio complementing Ithaca Energy’s high-quality, long-life asset base with significant development opportunity.”
The business has already become a major player in the UK’s oil and gas industry. It is involved in the controversial Rosebank development, which is led by Equinor and which won government approval to go ahead last September.
The company is the prospective developer of Cambo, Britain’s largest and most controversial unexploited oil field, and plans to seek approval for the project before an autumn election – a move likely to generate a backlash from green groups.
Ithaca, which bought the field from Shell, has previously said it hoped to get the project fully approved before autumn 2024 when a Labour government is likely to take charge.
The business’s annual profits slumped to $215.6m (£170.1m) from $1bn, driven by impairments related to its oil and gas projects. It was also hit by a £263m tax bill under the UK windfall tax.
Iain Lewis, Ithaca’s interim chief executive, said: “The Energy Profits Levy continues to have a direct impact on investment in the UK North Sea, with projects across our operated and non-operated deferred or cancelled.
“The extension of the Energy Profits Levy by a further year to a sunset date of March 2029 highlights the continued fiscal uncertainty our sector faces.”
Ithaca listed on the London Stock Exchange in November 2022. Its former chief executive, Alan Bruce, left the group earlier this year.
A key prize in the deal with Eni is that it includes Neptune Energy, a private-equity backed company that produces oil and gas from UK fields but also controls fields in seven other countries, including Norway, Germany, Algeria, the Netherlands and Indonesia.
The foreign assets are thought to be particularly attractive, as the company has made clear its unhappiness at the unexpected rises in corporate taxation introduced by the windfall tax. Several other companies, such as rival operator Harbour Energy, have said the tax means they will shift investment to other countries.
In a recent Telegraph interview Mr Myerson said: “The UK oil and gas industry is not benefiting from ‘windfall profits’ – current oil prices are down 20pc and gas prices are down 75pc versus 2022, when the windfall taxes were initially introduced.
“The tax continues to significantly impact investment in the North Sea threatening 200,000 highly skilled UK jobs, reducing the UKs energy security and ultimately leading to higher prices and an increase in imported, higher emission oil and gas.
“In 2022, the UK spent £117bn on importing energy. Putting this into context, that’s over double the total funding earmarked for schooling in the 2024/25 tax year. It’s imperative that the UK government creates a tax environment that promotes investment in our own domestic resources.”
