Statoil halts North Sea oil projects

By Eric Watkins
The recent boost in UK taxes on oil and gas companies continues to rankle, with reports now saying that leading producers are reconsidering their activities in the North Sea. The latest report comes from the UK’s Daily Telegraph newspaper which says that one of the world's biggest oil companies, Norway's Statoil, has halted work on two North Sea projects because of the huge tax hit. It comes after smaller companies such as Valiant Petroleum warned that they are re-evaluating new projects, since Chancellor of the Exchequer George Osborne increased tax by 12% to more than 62%. There have also been reports that oil majors have withdrawn plans to sell billions of pounds in North Sea fields nearing the end of their lives, leading to fears they will be abandoned with oil still in the ground. Statoil, the Norwegian state-run company, said on Mar. 30 that it will "pause and reflect" on the future of its Mariner and Bressay fields to the south east of Shetland. Statoil was meant to start producing from the fields from around 2017, with the two holding an estimated 640 million bbl of oil. "The proposed tax change has significant impact on the project economics of Mariner,” Statoil said. “We have to pause and reflect to evaluate what impact this will have and consider how to proceed after this,” Statoil said. “This is a project about to be developed. With this tax increase, there is a substantial impact," Statoil said. All of this comes after the head of the UK’s Officie for Budget responsibility said that the added tax on North Sea oil and gas producers would have “no significant effect.” "We're assuming that there's no significant effect on the investment and production profile," Chote told members of parliament on the Treasury Committee. Graham Parker, also of the OBR, said the watchdog had concluded that the move was "very much a profits tax" and that companies would still press ahead with plans, given the high oil price. George Osborne, defending his policy to the select committee, argued that with oil prices high it is still "very profitable to invest to exploit these resources". Uh huh. Tell that to the investors. Contact Eric Watkins at
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