New Treasury Oil and Gas Industry Fiscal Forum Holds First Meeting
The first meeting of the Fiscal Forum, established by the Treasury to promote constructive, long-term engagement with industry on the UK oil and gas tax regime, was held today under the chairmanship of the Economic Secretary to the Treasury, Chloe Smith MP. The forum was attended by senior industry representatives and the Minister of State for Energy, Charles Hendry MP.
Forum member and chief executive of Oil & Gas UK, Malcolm Webb, commented:
"This was an encouraging first meeting of the new Forum. The discussions focused largely on the work which the Treasury, the Department of Energy and the Industry have undertaken together since Budget 2011. This work has revolved around how measures to extend the field allowance structure and provide certainty on decommissioning tax relief can stimulate investment and avoid infrastructure being prematurely decommissioned, at no net cost to the Exchequer.
"Whilst a number of robust projects have recently secured investment, we are concerned that over one billion barrels of the UK's oil and gas resource will remain undeveloped in the current tax regime. Furthermore, resolving uncertainty on decommissioning reliefs could deliver an additional two billion barrels; the market in mature North Sea assets has virtually dried up. Setting all this against 2011's dramatic falls in exploration drilling and in production and the resultant £2.3 billion drop in expected tax revenues, measures to stimulate investment need to be introduced as a matter of urgency.
Mr Webb concluded: "The UK oil and gas industry can play an important part in rebalancing the UK economy by providing highly skilled jobs, advancing technology, promoting exports and contributing a major portion of UK corporation tax for decades to come. To achieve that, the industry needs a secure and predictable fiscal regime. Oil & Gas UK looks forward to Budget 2012, which we hope will contain the measures now needed to stimulate increased investment in the UK's oil and gas resource in the medium and longer term and extend the productive life of the province."
The meeting was held at HM Treasury in the afternoon of 16 January 2012 with representatives from the following organisations in attendance:
- BG Group plc
- BP Plc
- Centrica Energy
- Chevron Upstream Europe
- CNR International (U.K.) Limited
- ConocoPhillips (U.K.) Limited
- ExxonMobil International Ltd
- Nautical Petroleum
- Oil & Gas UK
- Premier Oil plc
- Schlumberger Oilfield Services
- Shell U.K. Exploration and Production
- Subsea 7
- Talisman Energy (UK) Limited
- TAQA Bratani Limited
- Total E&P UK Limited
UK oil and gas production in January - September 2011 fell by 21% (versus the same period in 2010), compared with an average 7% per annum decline over the four years earlier (Source: DECC).
Exploration and appraisal drilling in 2011 fell to 42 wells, 32% lower than in 2010 (Source: DECC)
Oil and gas production tax revenues were £12.9 billion in 2008/9, £6.5 billion in 2009/10 and £8.8 billion in 2010/11. The Treasury's forecast for 2011/12 tax revenue at the time of Budget 2011 was downgraded by £2.3 billion in December 2011 from £13.4 billion to £11.1 billion (Source: HMRC).
Oil & Gas UK
is a representative organisation for the UK offshore oil and gas industry. Its 200 members are companies licensed by the Government to explore for and produce oil and gas in UK waters and those who form any part of the industry's supply chain.
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