Wednesday 22 March 2006

UKOOA Response to Budget 2006

The UK Offshore Operators Association (UKOOA), the representative organisation for oil and gas production companies in the United Kingdom, is disappointed that the Chancellor missed an opportunity to signal the need to reduce the tax burden on North Sea activity should oil prices fall in the future.

The average tax rate paid by oil and gas companies operating in the UK today is 57%, with all those companies paying corporation tax at a special rate of 50% and around 140 of the UKs older offshore fields subject to a further tax, Petroleum Revenue Tax (PRT), at 75%.   The UK oil and gas industry is forecast to contribute around £10 billion to the Treasury in the current tax year, rising to an estimated £12 billion in 2006/7.

"Having a Chancellor who remains "vigilant" on oil prices is not enough.  We believe that the current tax regime for North Sea activity is not sustainable," says Malcolm Webb, UKOOA chief executive.  "The UK is a mature, high-cost oil and gas province which must compete for investment from other more attractive exploration and development opportunities around the globe.

"Last Decembers doubling of the supplementary corporation tax rate on oil and gas production to 20% reduced the value of new investment in the UK by around 16%.  This will inevitably have an impact.  It raises concern about the industrys long term future precisely at a time when we need to protect the security of UK energy supplies by sustaining investment in the maximum recovery of our own oil and gas reserves."

Notes to Editors

1. The UK Offshore Operators Association (UKOOA) is the representative organisation for companies licensed by the British Government to explore for and produce hydrocarbons in UK waters.  It has 37 members.   

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