WATCHING THE WORLD CLOSING IN ON "DRILLER KILLER"

With David Knott from London Opposition to British Chancellor Norman Lamont's reforms to the U.K.'s petroleum revenue tax (PRT) is gaining strength. One exploration director said Lamont's immediate halt to tax relief for exploration and appraisal drilling (OGJ, Mar. 29, p. 29) earned him the nickname "Driller Killer."

April 5, 1993

3 min read

Opposition to British Chancellor Norman Lamont's reforms to the U.K.'s petroleum revenue tax (PRT) is gaining strength.

One exploration director said Lamont's immediate halt to tax relief for exploration and appraisal drilling (OGJ, Mar. 29, p. 29) earned him the nickname "Driller Killer."

This was mild compared with analyst Gaffney, Cline & Associates (GCA), Alton, U.K., which said: "The budget changes demonstrate clearly the U.K. government's inability to comprehend the nature of the exploration and production sector. The industry cannot develop what it has not discovered. If there is no incentive to look for oil and gas, the industry will not explore."

Rumors shot back and forth like pool balls. The one most commonly heard was that Lamont's treasury office did not inform the Department of Trade and Industry (DTI) of its PRT reforms until the night before the Mar. 16 budget change announcement on the PRT.

U.K. Offshore Operators Association (Ukooa) said Lamont changed the PRT regime without consultation. A Norwegian Ministry of Industry and Energy official said although oil companies did not like all the Norwegian government's policies, there was 12 months consultation before they became law.

COAL SCUTTLED

Oil companies may see hope in the Mar. 24 announcement by DTI chief Michael Heseltine of the coal industry review's findings (OGJ, Feb. 1, Newsletter). Heseltine announced that only 12 of the original 31 coal mines marked out for closure would be reprieved, and then with only 2 years to show profitability before the axe falls.

Heseltine said competing fuels would not be penalized to support coal mines. He approved three gas fired power stations and lifted the threat against Orimulsion (OGJ, Jan. 11, p. 22). Ukooa responded Mar. 25 that government "clearly recognized the vital contribution the offshore oil and gas industry is making to the nation's economy." That may be a little premature considering the gathering PRT storm.

SIMILARITIES

The PRT reforms announcement resembled the mine closures announcement in two ways: It came as a shock, and it angered most sectors of the industry.

DTI took 5 months to review mine closures after the initial backlash. Oil and gas and nuclear industries meanwhile came under threat of cutbacks. Gas field developments and power stations appeared to be a poor investment.

Lamont matched Heseltine's ability to stir up an industry. The PRT backlash began with Sam Laidlaw, managing director of Amerada Hess Ltd., taking the fight to government. Laidlaw opened the dialogue by meeting Michael Portillo, chief secretary to the treasury agency, Mar. 25.

The service sector army also began to march. Mike Salter, chief executive of Smedvig Ltd., Aberdeen, and chairman of the British Rig Owners Association, wrote to Prime Minister John Major detailing implications of PRT reforms. Salter plans meetings with Aberdeen politicians, aiming to get the drilling sector's views heard in Parliament.