North Sea tax breaks ‘critical for competitiveness’
23 Feb 2016
Pressures on the North Sea have prompted industry body Oil & Gas UK to lobby for a significant permanent reduction of ‘special taxes’ paid by the sector.
According to Oil & Gas UK’s 2016 Activity Survey, investment in new projects in the North Sea has collapsed, with the upstream industry expected to approve less than £1 billion spending this year.
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
Oil & Gas UK chief executive Deirdre Michie
That is compared to roughly £8 billion spent per year on projects in the last five years.
The trade body said the lack of investment sparks fears for the long-term future of the industry.
“A coherent approach by the industry, regulator and government will be critical to boost the industry’s competitiveness and its investors’ confidence,” said Oil & Gas UK chief executive Deirdre Michie.
“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,” she added.
Michie also said it was “absolutely crucial” the recently announced Aberdeen City Region Deal and funding for the Oil and Gas Technology Centre is accompanied by the “right signals” in relation to the tax regime.
The industry currently pays special taxes at a headline rate of 50% and 67.5% for fields paying petroleum revenue tax, Michie said.
“A significant permanent reduction in those rates is now urgently needed, a move which would be consistent with HM Treasury’s ‘Driving Investment’ plan for fiscal reform,” Michie said.
“This should be combined with additional measures to help unlock the late-life asset market and encourage exploration by permanently removing the special taxes from all discoveries made over the next five years.
“Finally, improving the effectiveness of the Investment Allowance would stimulate activity in the short term and attract fresh investment,” she added.
