U.K. JOB LOSS SEEN IN PRT CHANGES

The U.K. Treasury has acknowledged that changes in the country's petroleum revenue tax could result in the loss of 10,000 jobs in Britain's North Sea oil and gas industry. Changes in the PRT were disclosed by Chancellor Norman Lamont last month (OGJ, Mar. 22, p. 31). However, the U.K. government believes the L700 million ($1.05 billion) to be recouped in the first 3 years under the new tax regime would offset the job losses. Defense of PRT reforms came in response to pressure from

April 19, 1993

2 min read

The U.K. Treasury has acknowledged that changes in the country's petroleum revenue tax could result in the loss of 10,000 jobs in Britain's North Sea oil and gas industry.

Changes in the PRT were disclosed by Chancellor Norman Lamont last month (OGJ, Mar. 22, p. 31).

However, the U.K. government believes the L700 million ($1.05 billion) to be recouped in the first 3 years under the new tax regime would offset the job losses. Defense of PRT reforms came in response to pressure from operators and suppliers.

Keith Taylor, chairman and chief executive of Esso U.K. plc, called the changes "the most fundamental reform we have seen for a decade" with good and bad points.

"The reduction in PRT is a welcome response to many years of representations made and should positively impact the full recovery of oil from larger, older fields.

"At the same time, the reduction of relief for exploration expenditures and the loss of cross field allowance will likely lead to some reduction in activity.

"Overall, however, the move to lower tax rates and fewer allowances must be directionally correct. We now need a period of stability to plan our programs with confidence."

Jo Armstrong, energy economist at Royal Bank of Scotland plc, said the PRT reforms will hasten the end of the U.K. oil and gas industry.

"The policy came too suddenly to let companies plan for diversification," Armstrong said. "There is a reduced incentive to plow back any gains into U.K. exploration, and opportunities abroad now look more attractive. Once the exploration tap has been turned off, it may be much more difficult to turn it back on again."