Britain’s oil association, Oil & Gas UK, wants from the British government to impose a special tax regime to save the future of the country’s offshore oil industry, as investments are under-performing.
On 23 February, Oil & Gas UK said that 43 percent of the British oil fields in the North Sea will lose money this year if oil prices remain around $30 per barrel. This will result in deterring further exploration and investment. The energy association said that under the current trend, spending on new oil projects will fall below £1 billion in 2016, compared to £8 billion in a typical year.
“The trade body is calling on the Government for urgent reforms of the special taxes paid by the industry to attract investment back into the basin and minimize loss of capacity during the downturn,” the association said.
Oil & Gas UK’s chief executive, Deirdre Michie, said that the falling oil prices restrain the industry’s capability to maximize “the economic recovery of the UK’s offshore oil and gas.” According to the oil representative the government needs to establish a low tax regime.
“The industry currently pays special taxes at a headline rate of 50 per cent. A significant permanent reduction in those rates is now urgently needed, a move which would be consistent with HM Treasury’s ‘Driving Investment’ plan for fiscal reform. This should be combined with additional measures to help unlock the late-life asset market and encourage exploration by permanently removing the special taxes from all discoveries made over the next five years,” Deirdre Michie said.
According to CNN money, data from energy intelligence firm Rystad Energy shows that it costs British producers about $52 to pump a barrel of oil, on average while Saudi and Russian average production costs are much lower, at $9.90 and $17.20 respectively.