Published: 06 April, 2016
The UK oil and gas sector is fighting hard in a bid to restore competitiveness, and expects to have improved efficiency and its average unit operating cost by more than 40% compared with two years ago.
The industry’s positive reaction to the current climate has also been acknowledged by the Chancellor in his recent budget, which will see the headline rate of tax paid on UK oil and gas production falling from 50-67.5% to a rate of 40% across all fields – a move welcomed as further progress in modernising the tax regime for an increasingly mature basin.
Regarding exploration, I agree with Deirdre Michie, Oil & Gas UK’s chief executive, who says the industry appreciates the continued funding of seismic and hopes that the tax rate changes prove sufficiently effective alongside the steps the OGA are taking to promote exploration activity.
Mike Tholen, Oil & Gas UK’s economics director, explains that in such a mature basin like the UKCS where special attention and expenditure must be directed at maintaining the integrity of oil and gas infrastructure, we know that strong and sustained investment does translate into higher production. Indeed the 10% increase in production in 2015, confirmed recently by the Oil and Gas Authority, is a direct result of significant annual capital expenditure in the five years to 2014.
The Budget also provided certainty on the availability of decommissioning tax relief, where an asset is transferred but the decommissioning liability is retained by a previous owner, which should assist the asset trading market.
In addition the further adjustment to the Investment Allowance to facilitate investment in infrastructure, will also support the drive to Maximise Economic Recovery. The tax changes announced in the recent Budget compliment the sector’s own efforts to secure an enduring industry.
Finally, if you’re attending the forthcoming European Offshore Energy Exhibition, co-located alongside; Air-Tech, Fluid Power & Systems, Plant and Asset Management, and Drives & Controls Exhibitions – at Birmingham’s NEC (Halls 3/3A) from 12-14th April 2016, please don’t forget to come and meet the Offshore Design & Engineering journal team.