No major tax changes

Published 22.06.2010 22:24:32 by John Bradbury

Management expert Deloitte says the UK emergency budget unveiled by Chancellor George Osborne has failed to introduced any major new tax changes which will hit North Sea industry.

While North Sea operators will probably be breathing a sigh of relief that the UK offshore sector has not been hit by any major taxes, Deloitte noted that the new Chancellor has not followed through on a Conservative party policy stated back in March before the general election that it would reform both tax and licensing for the UK oil exploration and production sector.

“The coalition Government has not announced any new or radical North Sea taxation regime changes. This is perhaps to be expected, bearing in mind the short period that Government has had to introduce new measures,” observed Andre Ogram, one of the oil and gas tax partners at Deloitte in Aberdeen.

However Ogram has suggested major change will be needed in the future if the viability of the industry is to be encouraged.

He stated: “It is to be hoped that future taxation measures will also be adopted to prolong the life of the North Sea and to maximise the recovery of reserves. The past few years has seen the previous Government tinkering around the edges of the North Sea fiscal regime. If the intention is to prolong the life of the North Sea and maximise recovery of reserves we suggest that more radical reform will be necessary.”

Deloitte pointed out that back in March the Conservative Party published an energy policy paper Rebuilding Security in which it talked talked about reforming North Sea taxation and licensing.

Clearly, according to Deloitte, the Conservative-Liberal Democrat governments has chosen not do that at this stage. The tax and accountancy expert goes on to say there was a suggestion that the Conservatives – if elected - would also seek a cash windfall from North Sea operators seeking to pay up front for their future liabilities under Petroleum Revenue Tax (PRT).

“The aim of this proposal would be to help Government by providing cash now rather than over the next few years and to reinvigorate the North Sea gas fields developed before 1993 which would not be subject to the 50% tax on field profits going forward,” Deloitte notes.

Instead it refers to the government's recent announcements to extend field allowances on High Pressure, High Temperature fields - such as Total's Elgin Franklin development – and to extend the access to offshore infrastructure provisions.

“It is to be hoped that future taxation measures will also be adopted to prolong the life of the North Sea and to maximise the recovery of reserves,” Deloitte's Ogram has suggested.

Resources

	Print story		Contact us
	Related stories		Front page

No single cause for Macondo accident

Valiant racks up profit

No infringements from HSE report

Executive denies bullying on rigs

Suspension for Lambouka 1 gas find

Blame expected from BP report