New Treasury – oil and gas forum holds first meetingNews // January 24, 2012
The first meeting of the Fiscal Forum, established by the Treasury to promote constructive, long-term engagement with industry on the UK oil and gas tax regime, was held recently under the chairmanship of the Economic Secretary to the Treasury, Chloe Smith MP. The forum was attended by senior industry representatives and the Minister of State for Energy, Charles Hendry MP.
Forum member and chief executive of Oil & Gas UK, Malcolm Webb, commented: “This was an encouraging first meeting of the new Forum. The discussions focused largely on the work which the Treasury, the Department of Energy and the Industry have undertaken together since Budget 2011.
This work has revolved around how measures to extend the field allowance structure and provide certainty on decommissioning tax relief can stimulate investment and avoid infrastructure being prematurely decommissioned, at no net cost to the Exchequer.
“Whilst a number of robust projects have recently secured investment, we are concerned that over one billion barrels of the UK’s oil and gas resource will remain undeveloped in the current tax regime. Furthermore, resolving uncertainty on decommissioning reliefs could deliver an additional two billion barrels; the market in mature North Sea assets has virtually dried up.
Setting all this against 2011’s dramatic falls in exploration drilling and in production and the resultant £2.3 billion drop in expected tax revenues, measures to stimulate investment need to be introduced as a matter of urgency.
Mr Webb concluded: “The UK oil and gas industry can play an important part in rebalancing the UK economy by providing highly skilled jobs, advancing technology, promoting exports and contributing a major portion of UK corporation tax for decades to come.
"To achieve that, the industry needs a secure and predictable fiscal regime. Oil & Gas UK looks forward to Budget 2012, which we hope will contain the measures now needed to stimulate increased investment in the UK’s oil and gas resource in the medium and longer term and extend the productive life of the province.”