(MENAFN- The Peninsula) The British government promised its oil and gas industry yesterday that it would cut tax rates in the sector to help dampen spiralling costs.
UK North Sea oil and gas output, worth around £5bn a year to government coffers, has declined rapidly as resources run low and costs to develop and operate fields surge.
The government concluded in a review published yesterday that it would have to reduce taxes imposed on the industry to help it cope with huge costs to encourage oil firms to continue extracting oil and gas from the North Sea.
The first announcements will be made in the 2015 budget, which is scheduled for March.
An independent review carried out by oil industry veteran Ian Wood estimated in February that around £200bn worth of oil and gas is still trapped in the North Sea. "The overall tax burden on the industry will need to fall as projects become more marginal, in order to achieve the goal of maximising economic recovery," the government review said.
Finance Minister George Osborne announced a first attempt at tackling the oil and gas fiscal regime on Wednesday when he introduced a two percentage point cut in a supplementary oil tax charge.
As part of the review, the government has also decided to introduce an overarching investment allowance that will treat all exploration technologies equally.
As well as huge investment and operational costs, oil and gas producers also face a dramatic drop in oil prices as Brent prices have fallen below $70 per barrel.
"We recognise the low oil price is a concern. The changes we will make are not a one-off, we want to go further and there is more to do," said Priti Patel, a junior minister in Britain's finance ministry, in a telephone interview.
She added the government was in the process of picking priority areas to address first in consultation with the industry and that further fiscal regime changes would be announced at the next budget. Patrice de Vivies, senior vice-president for northern Europe at French oil major Total, said at the event the oil firm may have to postpone some investments from next year into 2016 because of the weak oil price environment
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.