UK tax decision welcomed by oil industry

Oil companies operating in the UK North Sea breathed a sigh of relief yesterday following UK Chancellor Gordon Brown's assurance that overheated crude prices would not spur him to impose a windfall tax on the industry. 'I am determined not to make short term decisions based on short term factors,' said the chancellor. 'The key issue is the level of long term investment in the North Sea. And this will be the approach that will guide budget decisions in future.'


LONDON�Oil companies operating in the UK North Sea breathed a sigh of relief yesterday following UK Chancellor Gordon Brown's assurance that overheated crude prices would not spur him to impose a windfall tax on the industry.

The last 2 months have seen Britain's transport hauliers and farmers lobbying hard for a hike in the petroleum revenue tax borne by UK North Sea oil producers. They contend that proceeds from such a rise could be converted into a cut to duties presently paid by businesses and consumers on diesel and gasoline.

Delivering his pre-budget autumn statement on Wednesday, Brown turned aside suggestions that oil companies should be subject to "special taxes" as a time when they were "earning higher profits from higher oil prices," instead placing the emphasis on the long term outlook for the industry.

"I am determined not to make short term decisions based on short term factors," said the Chancellor. "The key issue is the level of long term investment in the North Sea. And this will be the approach that will guide budget decisions in future."

The UK Industry Leadership Team (ILT) which represents oil companies, contractors and trade unions in the offshore oil and gas industry said it "welcome[d] the Chancellor�s comments on the North Sea fiscal regime" and his resistance to responding to short-range factors.

"We have always been confident that the government understands fully the economics of the UK industry and the competition that it faces from other parts of the world for investment capital," the ILT stated. �Recent announcements have confirmed earlier impressions that investment is returning to the North Sea, and the stability of the UK fiscal regime is one of the reasons for this."

A recent sounding of the UK Offshore Operators Association's 32 members found that "investment intentions" for next year stood at some �4 billion. This figure was up by roughly �1 billion on the spending plans for 2000, and did not factor in oil companies' exploration budgets. "Nearly half" of the anticipated outlay by UKCS oil companies polled has already been greenlighted by their respective corporate boards (OGJ Online, Oct. 23, 2000).

UK North Sea operators including BP, Shell, and Kerr McGee have over recent months made announcements promising to invest a total of some �6.5 billion capital expenditure over the next 4 years on the UK Continental Shelf (UKCS).

The UKCS produces some 2.3 million b/d of oil out of global output of 76 million b/d.

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