Oil and Gas UK demands ‘simpler’ North Sea tax system


Malcolm Webb, Chief Executive, Oil and Gas UK
Malcolm Webb, Chief Executive, Oil and Gas UK

Oil and Gas UK, the trade association – which welcomes the UK government review of North Sea taxation – said that the industry faces ‘an uncertain review’ and that the tax review is urgently needed”.

Michael Tholen, Oil & Gas UK Economics Director, said: “The current fiscal regime has become increasingly complicated and unpredictable with high tax rates combined with a multiplicity of allowances.

“While targeted allowances have successfully encouraged a wave of activity in recent years, temporarily halting the production decline, their impact is diminishing in an ever more expensive business climate.

“Investors are increasingly looking to invest elsewhere rather than in the UK.”

And Malcolm Webb, Oil & Gas UK Chief Executive, added: “The Wood Review calls for a tripartite approach to the UKCS between HM Treasury, the new regulator (the Oil and Gas Authority) and industry to maximise economic recovery (MER).

“The current fiscal regime is becoming a barrier to investment both in new fields and in the many mature opportunities. This will be the first instance of MER in action and we have high expectations for what the consultation will deliver.  

“While our members will work closely with HM Treasury to respond in depth to the Consultation this review must lead to early action.  It cannot simply be a paper exercise.

The tax regime must be simplified and the headline rates reduced to send a strong signal that the UKCS is open for business.

“The North Sea continues to have a big impact on our economy.  Crude oil and gas provide around three quarters of the country’s primary energy and this level of dependency is unlikely to change significantly for many years to come.

“Government policies to encourage investment that maximises domestic oil and gas production makes economic sense, in that this helps to minimise costly energy imports and strengthens the UK balance of trade.   

“Promoting a strong indigenous oil and gas industry also has wider economic benefits. This industry was the largest industrial investor in the UK economy last year (£14 billion in 2013) and its supply chain has a turnover of over £35 billion, of which more than £14 billion of goods and services were exported to a global market.  The sector supports some 450,000 jobs in the UK. 

All of this is at risk if activity declines and there is no upturn in exploration.”

Pixie Energy

Pixie logo Pixie Energy is an incubator and a facilitator of strategic research and project work, focusing on energy regulation, policy and markets at the local and national level. Find out more about Pixie Energy here.

Local Energy Matters: Scotland

Local Energy Matters: Scotland is a free-to-download brochure with a focus on energy tariffs in the two Scottish electricity distribution regions, as well news on local energy and low-carbon schemes.

Previous editions can be download here.

Scottish energy market overview

You can read an overview of the Scottish energy market here.

Scottish Government energy feed