IOCs: UK tax hike threatens investment, economy

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, May 6 -- International oil companies operating in the UK voiced their displeasure with recently announced tax hikes, writing in a collective letter to London’s The Times that investor confidence has been damaged by the increases.

"Investor confidence has been severely damaged by this policy," said chief executives and senior executives of companies, including Centrica PLC, E.On AG, Total SA, Royal Dutch Shell PLC, and BG Group PLC.

"We believe that the UK natural gas production industry cannot bear the burden of the increased taxation and the consequences of this will be disproportionately damaging,” the letter said.

The companies called on the British government to rectify the issue in order to protect investment and maintain the UK's security of energy supply.

The letter followed efforts by government officials to defend the new tax policy, telling members of Parliament (MPs) that its analysis suggested the impact on industry investment would be marginal.

The government justified the tax increase on the basis of higher oil prices, but gas producers on the UK's Continental Shelf argue they will be hit harder as gas prices have not risen as much as those for oil.

"Gas needs separate and special attention. How that precisely works, we need to sit down and agree with the Treasury the best way to operate that," said Malcolm Webb, chief executive of Oil & Gas UK, told MPs in an earlier session.

However, the UK’s Energy and Climate Change Sec. Chris Huhne told MPs that he disagreed with the industry's assertion that the difference in the prices of natural gas and oil should see them decoupled for tax purposes.

"Obviously, it is possible we will see the same substantial divergence,” said Huhne. But he insisted that, “we haven't seen it yet because of anticipation in the markets post-Fukushima that the Japanese will have to buy substantial additional LNG cargoes from our suppliers in Qatar among others.

More to the point, Huhne said, “In the Far East there has been no delinking of the gas and oil prices.”

Justine Greening, economic secretary to the Treasury, likewise argued to fellow MPs that the impact on the industry would be “marginal” given current high oil prices averaging well over $100/bbl this year.

"It clearly has an impact on investment at the margin," Greening said when asked the tax rises. "We of course want to work with the industry to make sure that we can mitigate that,” she said.

“This government has already taken steps to introduce improved field allowances and that's what we want to continue to do over the coming months," Greening told the MPs.

The British government has faced strong lobbying from the oil and gas industry since March when it unexpectedly announced the increase to the supplementary rate on oil and gas production profits to 32% from 20%.

Earlier this week, Centrica PLC said it may permanently close its Morecombe Bay natural gas field, described as the UK’s largest, due to the new tax rates recently imposed by the British government.

"Following the increase in supplementary corporation tax in the Budget, UK oil and gas fields are now subject to some of the highest levels of tax in the world—our South Morecambe field is now taxed at 81%,” said a Centrica spokesman (OGJ Online, May 4, 2011).

Contact Eric Watkins at hippalus@yahoo.com.

Related Articles

EIA: US gasoline prices lowest in years heading into Thanksgiving holiday

11/26/2014 As of Nov. 24, the average retail regular-grade gasoline price in the US is $2.82/gal, 47¢ lower than a year ago, and the lowest price heading into...

MARKET WATCH: Crude oil prices volatile before OPEC meeting

11/26/2014 Crude oil prices fell more than $1/bbl on the New York and London markets Nov. 25 while traders waited to see if the Organization of Petroleum Expo...

Gas agreement seen firming China-Russia energy ties

11/25/2014 A Nov. 9 framework agreement for another large gas-supply deal between OAO Gazprom and China National Petroleum Corp. remains far from concluded bu...

Moody’s: E&P spending to dip as crude oil prices slide

11/25/2014 Weakening crude oil prices will cut exploration and production spending by independent producers in the US next year and make integrated oil and ga...

SEC said to extend Dodd-Frank proposals deadline to October 2015

11/25/2014 The US Securities and Exchange Commission reportedly has extended its deadline until October 2015 for proposing new requirements for publicly trade...

MARKET WATCH: NYMEX oil prices hovering around $76/bbl

11/25/2014 Crude oil futures prices moved narrowly in Nov. 24 trading on both New York and London markets ahead of a Nov. 27 Organization of Petroleum Exporti...

MARKET WATCH: Crude oil futures end week above $76/bbl in New York

11/24/2014 The New York Mercantile Exchange January crude oil contract increased 66¢ on Nov. 21, closing at $76.51/bbl. The February 2015 contract increased a...

Deloitte: US gas supplies rebuilt since last winter, EIA's Sieminski says

11/24/2014 The biggest issue this winter could be electricity generation in New England because of pipeline constraints rather than a drawdown of stored natur...

MARKET WATCH: NYMEX crude up on recovering Chinese oil demand

11/21/2014

Oil prices bounced back up $1/bbl on the New York market Nov. 20 on indications that Chinese oil demand might be recovering.

White Papers

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Increase Equipment Uptime Through Robust Enterprise Asset Management

Whether you operate in the Upstream Drilling and Exploration sector, the Midstream distribution sector...
Sponsored by

Continuous Improvement for Maintenance with Robust Reporting and Analytics

You should have real-time, anywhere access to more relevant and comprehensive data to help manage and ...
Sponsored by

Enterprise Asset Management Solution for Movable Assets in the Oil & Gas Industry

Drilling and exploration companies face several challenges in effectively managing assets both offshor...
Sponsored by

Supporting HSE Needs for Oil & Gas Through Effective Asset Management Practices

The Oil & Gas industry is constantly being challenged to find, extract and deliver cheaper an...
Sponsored by

Sesam for subsea design analysis

With the exponential growth in the subsea sector, a new set of challenges now face the industry. Mostl...
Sponsored by

Is the gas delivery system you’re looking at able to meet your power generation needs: a hydraulic engineer’s perspective

The hydraulic characteristics, and system response to demands and supplies, of natural gas pipelines a...
Sponsored by

Available Webcasts



Optimizing your asset management practices to mitigate the effects of a down market

When Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST



On Demand

Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected