UK tax regime is harming oil and gas sector say industry chiefs


  By Anne-Marie O’Donnell
Oil bosses have called on the UK government to put an end to the “complex” and “unpredictable” tax regime for the North Sea or risk further loss of confidence in the sector.
Oil and Gas UK boss Malcolm Webb met with Financial Secretary to the UK Treasury Nicky Morgan and other industry leaders earlier this week and said they’d had a “very frank discussion” about the industry’s future direction.

Ms Morgan was in Aberdeen to kick off of a North Sea tax review ordered by UK chancellor George Osborne. Tax issues in the sector will be looked at as part of the review, and initial findings will be reported in the Autumn statement.

Speaking to trade title Energy Voice, Mr Webb said the UK government’s tax system for the sector was causing uncertainty and called for change.

“We have this paradox with significant capital investment in a number of good projects, and then we have exploration on the floor and a very significant cost challenge,” he said.

“All of that adds up to the fact that an industry which needs to be competitive on a global stage quite frankly isn’t at the moment.  I think we all recognise that it doesn’t all come down to tax, but the fiscal regime has an important role to play.”

He added: “There is also an understanding at the moment that the fiscal regime we have is too complex and unpredictable – we need to do something about that.”

The industry is still reeling from a decision by the UK government to add an extra tax on oil rigs and flotels coming into the North Sea to carry out work.  While the Treasury estimated it would cost the sector around £175m a year, industry insiders have said the true cost could be nearer £1bn.

Maureen Watt, SNP MSP for Aberdeen South and North Kincardine, said the UK government had failed to provide stability for the industry and called for more effective communication.

“Mr Webb’s comments are spot on – the UK government has been messing about with the complex tax system in the North Sea too frequently for far too long,” she said.  “To realise the North Sea’s full potential then we need long term predictability and stability for the industry, something that the UK government has totally failed to achieve over the years.

“In contrast to the approach taken by the UK, the Scottish government is clear on the need for closer co-ordination and co-operation between the industry and relevant bodies.”

She added: “There is estimated to be up to 24 billion barrels of oil and gas still to be recovered from the North Sea, with a potential wholesale value of up to £1.5 trillion.

Ms Morgan said the UK government would be “willing to forego” tax revenue to assist the sector in the long term, but fears over how much damage has been done to the industry have not yet been quelled.

Earlier this year, international oil boss James Edens, the managing director of CNR, revealed that the firm was sending its UK staff elsewhere to work as a result of George Osborne’s tax regime. Mr Edens said the government was “not getting it right” and the business had subsequently slashed its UK spending.