Oil & Gas UK voiced support for all but one of several measures affecting the offshore producing industry announced in the UK government’s annual budget speech.
One measure welcomed by the industry group was support voiced by Chancellor of the Budget George Osborne for “all recommendations of the Wood report,” a review of oil and gas work on the UK Continental Shelf (UKCS) aimed at achieving “maximum economic recovery” (OGJ Online, Feb. 24, 2014). Ian Wood, retired chairman of the Wood Group, oversaw work on the review.
OGUK also praised Osborne’s commitment, in his “budget 2014 speech” Mar. 19, to “review the whole tax regime to make sure it is fit for the purpose of extracting every drop of oil we can.” Malcolm Webb, chief executive of the industry association, called the offshore oil and gas fiscal regime “overly complex, burdensome, and uncompetitive.” The industry faces marginal tax rates of 62-81% on oil and gas production, he said.
The trade group further welcomed Osborne’s announcement of a new allowance for ultrahigh-pressure, high-temperature fields. The measure will exempt from profits subject to supplementary taxation at least 62.5% of capital expenditure in qualifying projects, according to Webb.
The measure resisted by OGUK concerns increased taxation of bareboat chartering. The group said it will increase day rates for drilling rigs and floating accommodation vessels.
“We fear that this move will drive drilling rigs, already in short supply, out of the UKCS,” Webb said.