Treasury launches North Sea tax review
14 Jul 2014
The government today launched a review of the oil & gas tax regime aimed at making the UK Continental Shelf (UKCS) more attractive to investors.
A call for evidence was issued by HM Treasury this morning to mark the start of a 12 week investigation into the tax regime and the long term future of the oil & gas industry.
In a statement accompanying the call for evidence, the Treasury acknowledged that exploration and production in the North Sea was “becoming harder and more expensive, and the UK is facing competition for capital from other countries”.
Investors are increasingly looking to invest elsewhere rather than in the UK
Oil & Gas UK economics director Michael Tholen
Oil & Gas UK welcomed today’s announcement, with the trade body warning that the UKCS was “a mature offshore oil and gas province and one of the world’s most expensive basins to operate and invest in” and that there were “worrying signs that investment will halve over the next four years, whilst exploration remains at an all-time low”.
“The current fiscal regime has become increasingly complicated and unpredictable with high tax rates combined with a multiplicity of allowances,” added Oil & Gas UK economics director Michael Tholen.
“While targeted allowances have successfully encouraged a wave of activity in recent years, temporarily halting the production decline, their impact is diminishing in an ever more expensive business climate. Investors are increasingly looking to invest elsewhere rather than in the UK.”
The UKCS attracted a record £14.4 billion on capital investment last year, largely due to the rising costs associated with exploration and production, but also partly due to the introduction of a number of tax breals such as the brown field allowance.
