UK Government Close To Ending Royalty Payments
The British government said it was close to announcing the abolition of royalty payments on oil companies' North Sea revenues, part of a plan to offset a new oil tax unveiled in the budget in April. A spokesman for the Department of Trade and Industry said a decision had now been made to abolish royalties, but the exact method and timing would follow consultation with the industry.
"It is now about when, rather than whether, to abolish them," the spokesman said. Chancellor of the Exchequer Gordon Brown angered oil companies in his budget by slapping a new 10 percent tax on North Sea oil profits which hit the 30 or so companies producing oil and gas in Britain, both on and offshore.
But he sweetened the pill by offering higher allowances on new investment and by saying he was considering, subject to consultation, abolishing 12.5 percent royalties applying to fields approved for development before March 1982. But now the decision has been taken to scrap the regime.
"We will soon announce a consultation process to establish exactly how to scrap it, looking at whether to phase it out or go for a 'big bang' approach," the spokesman said.
Brown said in April that scrapping royalties and raising investment allowances would offset the new oil revenue tax for companies, which the Treasury estimates will raise 450 million pounds in fiscal 2003/04 and 600 million the year after.