Calls for tax incentives to help the UK’s beleagured offshore oil industry gained momentum this week as BP Amoco chief executive Sir John Browne called for a rethink in the North Sea tax regime.
And reports emerged that the joint task force set up by Peter Mandelson late last year to find measures to enable the UK’s oil industry to survive a sustained period of low oil prices is also considering tax concessions to stimulate new oil projects. Over the past 18 months the price of Brent crude has fallen 47%.
Browne told the Institute of Petroleum: ‘The continued existence of a separate tax regime for oil and gas in the North Sea above and beyond standard corporation tax is a barrier to activity and a tax on investment and employment.
‘A change in the approach to taxation would provide a real encouragement to the development of the remaining resources in the North Sea.’
Meanwhile, sources close to the task force discussions say one proposal would be to group several small fields together as one for tax purposes.
An unexpectedly high government budget surplus for January, £12.4bn against an expected £10bn, may encourage hopes for such measures.
However, any proposal to lighten the tax burden on oil companies is likely to meet stern scrutiny from Chancellor Gordon Brown, who on assuming office attempted to increase the Government’s take.
He eventually backed down in face of concerted industry opposition and continuing low oil prices.
The industry’s gloomy prospects worsened this week when Shell announced it is to cut its worldwide capital expenditure to £11bn from £16bn. It said it has yet to decide its capital budget for the North Sea, but warned that all projects there were under review.
BP/Amoco’s profits for the year to December 31 were $4.6bn (£2.8bn), down from $6.96bn in the previous year.