Uchenna Izundu
International Editor
LONDON, Mar. 14 -- North Sea operators are welcoming tax changes by the UK Chancellor that aim to extend the life of marginal oil fields.
During his first budget, Alistair Darling reported he would reform petroleum revenue tax (PRT) and help operators cover the treatment of decommissioning costs of oil and gas installations in the UK North Sea.
Companies can delay decommissioning because of an extension of corporation tax loss carry-back to 2002, instead of 3 years as was previously the case. The government will also address inconsistencies regarding the application of PRT to decommissioning liabilities and the proposal to remove PRT nonpayers from future exposure to the tax.
Trade association Oil & Gas UK welcomed the measures but stressed that more fiscal changes were needed to attract investment in a competitive global environment.
Malcolm Webb, OGUK's chief executive, said the new changes will provide greater certainty and consistency. "However, this should only be regarded as the start of the process of simplifying and easing the tax burden on UK oil and gas production, and we look forward to the next stage of the government consultation producing further positive outcomes to that end."
Investment on the UK continental shelf fell by £1 billion in 2007. OGUK said it was necessary to change the 50-75% tax rate on new projects if the UK is to carry on producing hydrocarbons.
Mike Tholen, OGUK's economics director, added: "The future of the North Sea can only be properly secured by simplifying and reducing the overall tax burden to ensure [that] investment can be sustained in this mature and challenging province."
The government estimates that it will receive £9.9 billion in tax revenues from the North Sea in 2008-9, up from £7.7 billion this year.
Contact Uchenna Izundu at [email protected].
