By Max Clarke
Among the policies introduced by Chancellor George Osborne in the 2011 Budget was a 30% hike in the tax paid by North Sea oil companies.
While this will initially generate billions in revenue for the treasury and will cover the £2 bn required for the fuel duty stabiliser, experts and oil industry representatives speculate the barrier to North Sea extraction it will impose will cost tens of thousands of jobs and ultimately lose the economy billions.
UK Oil and Gas, the body representing British oil companies, met yesterday with the Chancellor to appeal what they deem an unfair and unwise tax hike.
Malcolm Webb, chief executive for the trade body comments on the hike and on yesterday’s meeting:
“Oil & Gas UK engaged with the Chancellor and Economic Secretary to the Treasury in a wide ranging discussion about the implementation and impacts of the tax increase, including the higher supplementary charge on corporation tax and the resultant 81 per cent tax rate on mature fields. In particular, the discussion focused on the impact on gas production and the UK’s energy security, decommissioning, infrastructure, employment in the supply chain and the international competitiveness of the province.
“Notwithstanding the Chancellor’s requirement to raise money, Oil & Gas UK explained why both the unexpected nature and the scale of the increase to between 62 and 81 per cent tax has damaged investor confidence and will hamper investment, maximum recovery of the UK’s oil and gas and job creation. Disappointingly, the Chancellor has a different view.
“The Treasury has requested further discussion on how to improve the operation of the trigger price mechanism and new and further field allowances. The Chancellor also requested dialogue on the issues around decommissioning, to be concluded by Budget 2012. Oil & Gas UK agreed to engage on these issues.”