UKOOA survey reveals extent of tax hit on North Sea explorationOrganisations and Associations // July 19, 2002
UKOOA's survey of its Exploration Committee members aimed to establish the impact managers expect the Budget measures to have on offshore exploration activity, which is a key indicator of future investment and production on the UKCS.
Nearly 90 percent thought that the tax changes would have a detrimental impact on overall exploration and appraisal activity, while 50 percent said that their companies would be reducing exploration or reviewing their positions.
"Companies rank exploration investment opportunities globally and with the North Sea already finding it difficult, as a mature area, to compete in the world market for investment, UK prospects now rank even less favourably," explained James May, UKOOA'sdirector general.
The survey also indicated that over half of the companies would have reconsidered their applications in the 20th Licensing Round had the tax changes been announced before the Round's deadline on 16 April, just 24 hours before Budget Day.
"The new tax measures will affect project economics, and there is a risk that marginal prospects will not get drilled," adds James May. "Our concern is that overall exploration activity, which has been steadily declining since the early 1990s, will falleven further - an outcome that this country can ill afford. The cost to the nation will be the precipitated decline of the North Sea, placing tens of thousands of jobs at risk, diminishing tax revenues and an earlier end to Britain's self sufficiency inoil and gas."