By OGJ editors
HOUSTON, Dec. 6 -- UK Chancellor Gordon Brown announced a tax increase for oil companies in a move that energy experts predicted could discourage North Sea investment.
The chancellor's Dec. 5 prebudget report called for the UK supplementary corporate tax on UK and UK continental shelf production to rise to 20% from 10%, effective Jan. 1, 2006. The supplementary charge is in addition to a 30% corporate tax.
Banc of America Securities analyst Daniel Barcelo of New York noted that it's the second time the UK has raised taxes on oil companies in 3 years.
The UK Offshore Operators Association (UKOOA) issued a statement saying that its members were "shocked" that oil and gas producers will have to pay 50% in total corporation taxes.
"This will take an extra £6.5 billion out of the industry over the next 3 years when Treasury will already reap £11 billion in tax revenues from North Sea producers this year, double the amount paid last year, and treble the amount forecast 2 years ago," UKOOA said.
UKOOA Chief Executive Malcolm Webb said, "I am staggered that the chancellor, who speaks of the need for stability and long-term investment, should take this action. It is almost beyond comprehension that the government has failed to grasp the vulnerability of the industry's future in the UK."
Webb said the tax hike "will deter investment in new fields and make older fields less attractive for increased recovery." He said the effect would most hurt smaller oil and gas producers.