Oil & Gas UK said it welcomes “urgently needed” formal consultation announced July 14 by HM Treasury into the future of the UK offshore oil and gas tax regime.
“The current fiscal regime has become increasingly complicated and unpredictable with high tax rates combined with a multiplicity of allowances,” said Michael Tholen, OGUK economics director. “While targeted allowances have successfully encouraged a wave of activity in recent years, temporarily halting the production decline, their impact is diminishing in an ever more expensive business climate. Investors are increasingly looking to invest elsewhere rather than in the UK.”
OGUK believes there could be as much as 24 billion boe to recover, but will remain untapped unless there is “swift change.”
It describes the UK continental shelf is a mature offshore oil and gas province and one of the world’s most expensive basins to operate and invest in. Despite current record rates of investment, there are “warning signs” that investment will halve over the next 4 years, while exploration remains at an “all-time low.” Production has fallen rapidly in recent years, the group said.
OGUK Chief Executive Malcolm Webb said the current fiscal regime “is becoming a barrier to investment both in new fields and in the many mature opportunities.”
He said, “While our members will work closely with HM Treasury to respond in depth to the consultation, the review must lead to early action. It cannot simply be a paper exercise.”