INDUSTRY trade body Oil and Gas UK has urged the government to reduce taxes within the sector, after revealing fears about the future of North Sea oil production.
The trade group’s activity survey reveals a collapse in new project investment, with yearly financing dropping from £8bn a year to £1bn a year, despite the increase of oil and gas production.
Despite the rise in oil and gas production to an average of 1.64 million barrels per day in 2015, as well as a significant reduction in operating costs, revenues fell by 30% from £25.9bn to £18.1bn, caused mainly by the decrease in world oil prices.
The trade body predicts that if oil prices remain low (around £27 a barrel) throughout 2016, then half of all UK Continental Shelf (UKCS) oil fields will be operating at a loss.
Deirdre Michie, chief executive of Oil and Gas UK, has called on government to create more tax breaks for the industry, including a “significant permanent reduction” in headline tax rates to help attract fresh investment.
“The basin has to compete fiercely in the global market to attract price-constrained capital to the UK.
“A coherent approach by the industry, regulator and government will be critical to boost the industry’s competitiveness and its investors’ confidence.
“Together we need to transform the basin into a highly competitive, low tax, high activity province, which is attractive to a variety of operators and sustains and supports the important supply chain based here,” continued Michie, who added that the company has a “huge task ahead”.
‘100% support’ for oil and gas
A government spokesperson has responded to the report, stating that the chancellor is “100% behind our oil and gas industry”, and cited a number of examples as to how the government is already helping the sector.
“We have established the Oil and Gas Authority to drive greater collaboration and productivity within industry, and announced a radical £1.3bn package of tax measures in the March 2015 Budget to ensure the UKCS remains an attractive destination for investment and safeguard the future of this vital national asset.
“In January this year we announced a further package of measures including another £20m funding for a further round of seismic surveys, and our strategy to maximise economic recovery of the UKCS.”
Introduced in 2013 to encourage R&D investment, the scheme allows UK businesses to pay only 10% corporation tax on profits derived from any UK or certain EU patents
Signed into law by president Barack Obama in 2010, the Dodd-Frank legislation has tightened regulation of the US financial system
Just when SMEs thought they knew the lie of the land in terms of the Brexit timescale, Theresa May has caught them by surprise. Salvador Amico of Menzies asks how SMEs should react to the news of a snap election on 8 June
With the general election on 8 June, CIOT has warned against rushing through extensive legislation without adequate scrutiny and an appropriate timeframe to make necessary amendments