North Sea
Changes to the UK tax regime are helping push projects forward
Taxing times for UK North Sea
helped to boost project eco- nomics allowing marginal field developments to move ward.
C
UK North Sea Gannet platform
Since the low point of the
2011 Budget when the Supple- mentary Charge (SCT) rate was raised by 12%, several new initiatives have been in- troduced to help projects in the UK North Sea.
A small field allowance, an
allowance for new, large deep- water developments (west of Shetland oil), an allowance for new, shallow water gas fields and a brown field allowance have all been introduced. Mike Tholen, Oil & Gas UK’s economics director, ex-
hanges to the UK oil and gas tax regime over the past 18 months have
for-
plained at an Oil & Gas UK breakfast how these incentives are beginning to help turn the tide for North Sea projects. “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 a range of tax measures, including the brown-field allowance, aimed at promoting investment, jobs, production and tax revenues. “Gone are the days when companies looked at massive multi-well big platform devel- opments. Many, many oppor-
tunities now are single well tiebacks. Where there is a huge uncertainty about what might happen, you need the confi- dence that should things turn out not as expected, you won’t be hammered. “Field allowances are there to help nudge things across the line. One area which has really struggled was investment in existing fields.”
Tholen highlighted how
the tax regime has a powerful influence on investor senti- ment and explained how the fiscal levers recently acquired by the Treasury will have a profound impact on all aspects of the exploration and produc- tion cycle business. “The Government has the
levers to provide certainty and promote investment at all phases of a field development plan and, as such, can more di- rectly help arrest production decline.
“Measures to promote in-
vestment in new fields, whether small, shallow-water gas or large deepwater, or in ex- isting brown-fields, are en- abling 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 pro- duction and tax revenues.” He said the current pro- duction dynamic was worth noting. While UKCS produc- tion between 2000 and 2010 declined by around 6% a year, it crashed by 19% in 2011 fol- lowing the introduction of the
8 November/December 2012 Offshore Technology
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