Daily Management Review

Britain's oil taxes are sinking in the North Sea


05/30/2016


Net income from UK tax on oil and gas companies operating in the North Sea was negative for the first time since 1968, according to a report published by London agency Argus Media.



Swinsto101
Swinsto101
The government has collected £ 538 million (or approximately $ 790.5 million) for the 2015-2016 fiscal year. However, changes in tax rules, as well as lower oil prices over the long term mean that large amounts of money were spent on investments and subsidies.

In a statement, the tax authorities said that they were expecting a loss of £ 10 million, but the "low oil prices, high levels of investment and growth in asset write-off of expenses" led to an increase in the deficit.

Taxes for oil and gas companies in the United Kingdom have been reduced since January of this year, after the business has expressed its outrage at the tax rate increase.

This step, as well as other provisions in the tax area, have led to the fact that the tax income from oil and gas companies amounted to almost £ 1 billion. This was mostly obliged to the fall in oil prices and a prolonged recovery.

Earlier this year, the operators in the North Sea have announced that they have become unprofitable, according to the UK Office for National Statistics. BBC estimated that there are 24 billion barrels of oil in the North Sea.

According to a January analysis of oil and gas activity in the region, drilling and production are not profitable when the price of Brent falls to less than $ 50 per barrel.

Citigroup’s report, released last week, notes that the oil price will rise to over $ 50 per gallon for the III quarter of this year. Head of OPEC added that oil prices should grow and reach $ 65 per barrel to stimulate new investment in the oil and gas sector.

UK oil and gas companies, operate in the North Sea, cut more than 5.5 thousand jobs since 2014.

Oil companies, operate in the North Sea, are particularly badly affected as a result of almost 55% fall of Brent oil prices since June 2014. Already by that time, they had difficulties associated with high transaction costs of production in the pool.

Operators in the North Sea, including Shell, BP, Chevron and ConocoPhillips, announced reduction of staff, raising concerns about increasing shortage of qualified personnel.

The oil and gas sector employs about 375 thousand people. Until recently, the business remained one of the most important sources of tax revenue. Oil production in the UK fell to its lowest level since the start of production in mid-1970 as deposits are being exhausted.

Recall that in early 2015, specialists of oil and gas industry association Oil & Gas UK demanded from the British Chancellor of the Exchequer George Osborne to urgently reduce taxes in the industry.

As a result, taxes for oil and gas operators in the North Sea have been reduced since 1 January 2016.

source: argusmedia.com






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