North Sea oil and gas operators tell Holyrood MSPs about effect of UK tax changes

North Sea oil rig

Representatives from the oil and gas industry yesterday lamented the number of UK tax changes on the industry at a meeting of the Scottish Parliament’s Energy Committee in Aberdeen.

Mike Tholen of Oil & Gas UK described the impact of the UK’s record on the North Sea fiscal regime by telling MSPs; “There have been too many changes and indeed most recently the tax increases have been very hard to bear by an industry which is trying to do some very difficult things.

“At a time of very high drilling costs anything which adds to costs clearly is unattractive.”

Independent industry expert, Professor Alexander Kemp, said: “Multiple changes in taxation arrangements make things very difficult for investors who are trying to make long run investment decisions”

 “[Westminster’s] record really, as far as taxation policy is concerned, and in terms of  maximising economic recovery which is the widely accepted objective,  has left quite a bit to be desired.”

“It could hardly have come at a more unfortunate time, because the increased costs including the tax will be passed on by drilling companies… And that will affect in particular exploration because mobile rigs are used for exploration, and to some extent it will affect development drilling as well because there will be some mobile rigs used for development drilling”. 

Professor Kemp also condemned the “multiple changes in taxation arrangements”

These views follow recent warnings by Colin Pearson of Ernst & Young, on the new bareboat charter taxation plans, who said that Westminster’s latest tax raid on the North Sea could lead to a “scenario that sees a drop-off in the number of new developments” – while GDF Suez E&P UK have also made clear their concerns at the costs to the industry.

MSP Mike Mackenzie, an SNP Member of the parliamentary Energy Committee, commented: “More and more experts are making clear the negative impact Westminster’s mismanagement of the fiscal regime has had, and is having, on the North Sea. 

“In contrast, Scotland’s Future makes clear that after independence, the Scottish Government will ensure a stable fiscal regime for the oil and gas sector – and will work with the industry to ensure the greatest benefit is extracted from the remaining 24 billion barrels of oil.”

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