O&G UK Disappointed after UK Tax Talks

O&G UK Disappointed after UK Tax Talks

Tuesday, April 19, 2011
Dow Jones Newswires
by Alexis Flynn

The group representing major U.K. oil and gas producers said Thursday it was disappointed following talks with Chancellor of the Exchequer George Osborne on the impact a large tax increase on North Sea production would have on the industry.

Oil & Gas UK Chief Executive Malcolm Webb said, "Notwithstanding the Chancellor's requirement to raise money, [we] explained why both the unexpected nature and the scale of the increase to between 62% and 81% tax has damaged investor confidence and will hamper investment, maximum recovery of the U.K.'s oil and gas and job creation. Disappointingly, the Chancellor has a different view."

However, Webb said the Treasury requested further talks on how a mooted price floor mechanism, which would see the tax lowered in the event that prices dropped substantially, would work in practice. He said that it also wanted to discuss new and further field allowances, as well as continued dialogue on issues around decommissioning, to be concluded by Budget 2012.

A Treasury spokesperson told Dow Jones Newswires, "Today's meeting was constructive and while the Chancellor was clear that there would be no change in policy, he agreed to work closely with industry on the three areas for discussion set out in the Budget; setting the trigger price, stability in decommissioning and field allowances to support further investment."