Thursday, 20 March 2014

Osborne's Oil Exploration Tax Slammed


George Osborne’s latest tax raid on the North Sea oil and gas industry has been slammed by oil experts – amidst concerns that it could seriously damage exploration and development activity.

The UK Government yesterday announced a change to the basis for taxation on drilling rigs and accommodation vessels which use bareboat chartering arrangements – which experts suggest will increase costs and deter further exploration.

This latest tax raid on the North Sea flies in the face of David Cameron’s alleged commitment to ensure fiscal stability for the industry and has been described by Chief Executive of Oil & Gas UK, Malcolm Webb, as “perplexing”. Mr Webb also suggested that “this move will drive drilling rigs, already in short supply, out of the UKCS [United Kingdom Continental Shelf]”.

The move has also faced criticism from Taf Powell, Executive Vice President, International Association of Drilling Contractors who expressed concern at the hypocrisy of the UK Government’s claim that it is seeking to stimulate activity in the North Sea – and pointed out that this is the “latest example of fiscal instability that undermines claims that the UK is open for business.”

Commenting, Aberdeen South and North Kincardine MSP Maureen Watt said:

“George Osborne’s Oil Exploration Tax is yet another ill-thought out tax bombshell from a UK Government looking to use the North Sea as a cash cow.

“David Cameron recently promised to provide certainty and stability for the industry – instead his government’s irresponsible approach looks set to damage the potential for further exploration and force drilling operations out of the North Sea altogether.

“In contrast, Scotland’s Future makes clear that after independence, the Scottish Government will ensure a stable fiscal regime for the oil and gas sector – and will closely cooperate with the industry to ensure the greatest benefit is extracted from the remaining 24 billion barrels of oil.

“A Yes vote will give Scotland the fiscal powers we need to support the industry ensuring it is no longer subject to sudden and unexpected tax hikes by the UK Government, and will ensure the wealth from Scotland’s oil will no longer be squandered, but will benefit future generations through the establishment of an oil fund.”
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