UK rues oil taxes, seeks investment

The UK government is pushing to increase investment and production on the UK continental shelf (UKCS), publishing changes to the government’s stance in the 2007 Economic Report, Oil & Gas.

A key concern is the sustainability of oil and gas production on the UKCS, with increased spending yet to yields dividends in production. This is especially because low gas prices, inflation, and high taxes have made development of the UKCS less competitive in the world marketplace.

Eighteen months ago the UK government applied a new set of tax rules to oil and gas production, which was aimed at tapping the then record profits from oil companies. However, the anticipated revenues of £11 billion never materialised, with only £8 billion in tax revenues expected from the fiscal tax year.

The result is that the UK government is now re-assessing how it applies tax to oil development, having been burned by it’s attempted grab at oil revenues, realising that higher taxes do not necessarily mean higher revenues.

It comes as part of an overall assessment of how to make UKCS production more competitive in the world markets. This is especially as the government firmly believes that there remains a huge amount of untapped fields in the North Sea.

More competitive taxation and regulation are being sought in order to further investment in exploration across the UKCS, in order to help improve both production and profit margins.