Tax fixes seen lifting UK North Sea output

Oil and natural gas production from the UK North Sea, helped by tax breaks enacted after a surprise rate increase last year, will rebound in the next 5 years before starting a decline likely to be irreversible, according to a forthcoming university study.

Alex Kemp, professor of petroleum economics at Aberdeen University, reported highlights of the study at a meeting of the Energy Institute’s Aberdeen branch.

After declining by 19% last year to an average 1.8 million boe/d, Kemp said, UK North Sea production will rise to 2.4 million boe/d by 2017 or 2018.

“After 2017-18 there will be a decline, and we cannot see that being reversed,” he said. Production still could be 500,000 boe/d in 2042, he added.

The university conducted the study to assess tax breaks introduced by the government for challenging fields after an increase of a supplemental tax on oil and gas producers in the 2011 budget (OGJ Online, May 16, 2011).

“The new allowances have certainly moderated the effect (of the tax hike) very substantially, and it will make a big difference over the medium to longer term,” Kemp said.

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