Oil & Gas UK’s economics director, Mike Tholen, today (3 October) told a London audience of over 150 that recent changes to the UK oil and gas tax regime will promote investment to the benefit of British jobs, oil and gas production and tax revenues. He was speaking at an Oil & Gas UK breakfast briefing sponsored by Herbert Smith and The Royal Bank of Scotland.
Mr Tholen said: “The UKCS holds up to 24 billion barrels of oil and gas; hydrocarbons that are central to boosting not only Britain’s tax revenues but also jobs in the high technology supply chain, the balance of trade and energy security. Constructive engagement with HM Treasury over the last 18 months since the 2011 Budget has resulted in the introduction of a range of tax measures which have allowed global investors to consider projects on the UK continental shelf (UKCS) in a new light.
“Finally, the Government has the levers to provide certainty and promote investment at all phases of a field development plan and, as such, can more directly help arrest production decline. Measures to promote investment in new fields, whether small, shallow-water gas or large deepwater, or in existing brown-fields, are enabling investors to give the ‘green light’ to large and small projects alike which in the short-term boosts jobs in the supply chain and in the medium-term, increases production and tax revenues.”
Mr Tholen continued: “Securing certainty on the amount of tax relief available on decommissioning costs, the subject of a Treasury consultation that closed on 1 October, will reduce one of the risk factors for companies, leaving the industry to focus on managing other operational risks such as those geological or technical. This will allow the UKCS to be managed as a long-term asset, not simply a source of short-term cash flow.”
Nigel Hares, chief operating officer of UK exploration and production company EnQuest, reflected on how the tax changes have affected his company’s assets, both those currently producing and new investments. He said: “EnQuest welcomes the recent announcement from HM Treasury in support of investment in mature oilfields. The new brown-field allowance is expected to lead to the approval of projects which will extend the lives of fields and increase reserves, employment and tax receipts. Indeed, we are actively working towards approval of the Thistle life extension project.”