Total: UK Open to Mitigating Effect of Oil Tax Rise

Total: UK Open to Mitigating Effect of Oil Tax Rise

Wednesday, April 06, 2011
Dow Jones Newswires
by  James Herron

The U.K. government appears willing to consider measures to mitigate the effect of a recent large increase in tax on oil and gas producers, following a meeting with oil industry representatives last week, a senior executive at French oil company Total said Wednesday.

Representatives of the Department of Energy and Climate Change and the Treasury "realized that the concerns of industry are real...not just a selfish reaction," said Patrice de Vivies, Total's vice president of Exploration and Production in northwestern Europe.

Oil companies and many industry analysts have said the increase in the supplementary tax charge on their profits to 32% from 20% will hurt investment in the North Sea.
The measure was introduced in response to the rise of oil prices above $100 a barrel, but De Vivies said there is no justification for imposing the tax on gas fields, for which the price is equivalent to $55 a barrel.

"[They] will have to give extra incentives to gas fields," which make up the bulk of remaining U.K. resources, or face declining investment, he said. Total is reviewing all of its potential new projects in the U.K. following the change, he said.

Total Chief Executive Christophe de Margerie will meet soon with U.K. Chancellor of the Exchequer George Osborne to discuss the tax increase, De Vivies said.

Dow Jones Newswires put De Vivies' comments to the U.K. Treasury, who responded by referencing statements made by ministers in the wake of last week's meeting.
Energy and Climate Change Secretary Chris Huhne said at the time: "We're going to be considering some of the points that they [the industry] made. There are elements of what the Chancellor announced which were up for consultation, including the issue of the oil price at which the fair fuel stabilizer operates."

Separately, RWE Dea, the oil and natural gas unit of German utility RWE, said Wednesday the planned tax increase is "unpleasant" and should be retracted.
"We've learned about the U.K. government's plan to increase the tax and indeed found ourselves very flatfooted," said RWE Dea Chief Executive Thomas Rappuhn at the company's annual press conference in Hamburg.

Today's Trends: Natural Gas Funnelling

Tuesday, March 22, 2011

Rigzone Staff

by  Trey Cowan

The cylinder sections in the graph above represent a range of, plus-to-minus one, standard deviation surrounding the average annual natural gas prices for the corresponding years. Trading patterns over the last three years indicate that the price volatility of natural gas has diminished significantly. Specifically, the range has narrowed from $4.28 in 2008 to just $0.58 at present.

If the cylinders were to be placed concentrically side by side, the resulting effect would be a funnel. Proceeding from the wide-end of the funnel to present day prices, it appears that natural gas has reached a period of price stability.

While much has been written about oversupply issues, the normal corrective mechanisms (i.e. participants leaving) appear to be taking root in the natural gas markets. Specifically, since October 2010, the US land gas rig count has fallen from 950 to 856 rigs, a 10% decline. Taking the conservative assumption that each rig could drill 10 wells per year implies that 940 (10 wells x 94 rigs) fewer natural gas wells will be drilled over the next twelve months.

Given the dramatic decline curves associated with shale gas, such as the depleting 70% during the first year in the Marcellus; the downward trend in rig count implies that future reserve replacement will not likely keep pace with existing production. Such a scenario points to a rebalancing of supply and demand in the U.S.
The discipline we are seeing with regards to a lower natural gas rig count is not occurring in a vacuum. These rigs that were drilling for natural gas are now drilling for oil. In fact, the US land oil rig count has increased by 153 rigs over the same time frame (i.e. from last October until now). E&P firms have made it clear that the incremental return per unit of $11, favoring oil, is a strong incentive to continue shifting resources. Thus, additional drilling to reinvigorate gas production will not resume quickly once prices begin to improve because the equipment will likely not be available.

With prices stabilizing and production normalizing, we can now envision a point in the future months where price improvement rather than price destruction can be seen as the ensuing trend. Other factors that are starting to play to the natural gas market's hand are strengthening industrial demand and a trend towards more electricity generation using natural gas as the fuel. Given the recent nuclear crisis in Japan, the backlash on nuclear energy will only make burning natural gas even more desirable.

So, even with the +7% recent surge in natural gas prices last week, we still see reasons to get more bullish on the commodity in the near future.

Link

[Oil and Gas Post] - Fuel duty may be frozen, hints George Osborne

Fuel duty may be frozen, hints George Osborne

 20 March 2011 Last updated at 15:29 GMT

The government may scrap the rise in fuel duty planned for next month, it has hinted.

Chancellor George Osborne told the BBC's The Andrew Marr Show that he was "looking very carefully" at freezing the duty in Wednesday's Budget.

He said he understood the pressure motorists were under from record-high petrol prices.

Mr Osborne also said the Budget would contain measures to help tackle record-high youth unemployment.

'Nonsense'

A freeze on fuel duty has been widely anticipated.

The price of petrol has risen sharply in recent weeks to more than £1.30 a litre on average.

The is largely due to increases in the price of oil due to concerns about supply because of unrest in the Middle East and Libya.

Most observers say they expect the price of both petrol and diesel to continue rising, and motoring organisations such as the RAC have called on the government to scrap the planned rise in duty due to take effect in April.

It is due to go up by inflation plus 1p, making a total rise of about 4p per litre.

Others said Mr Osborne should look beyond the cost of fuel.

"The chancellor should tackle the impact of rising fuel prices by focusing on the root of the problem - the UK's economic addiction to oil," said Simon Bullock at Friends of the Earth.

"Urgent measures are needed to make public transport cheaper and more convenient, encourage greener motoring and reduce our dependency on car travel."

Youth unemployment

Shadow chancellor Ed Balls, also speaking on The Andrew Marr Show, reiterated his call for the government to reverse the VAT increase on petrol.

He said it was "nonsense" to argue that the European Union would not permit such a reverse.

The government increased the VAT rate in January from 17.5% to 20%.

Mr Osborne also said he would make available additional help for teenagers to gain access to apprenticeships and "high quality vocational education".

The unemployment rate for 18-24 year olds is currently at a record high of 18.3%.

Link
http://www.bbc.co.uk/