UK Govt, Oil Industry Attempt to Resolve North Sea Tax Issue
ABERDEEN (Dow Jones Newswires), Sep. 8, 2011
The U.K. government and the North Sea oil and gas industry have set up a joint forum to discuss issues around the fiscal regime, although resolution on possible tax relief for the decommissioning of old fields and installations will likely take some time, Treasury Minister Justine Greening said Thursday.
North Sea oil and gas companies have been vocal in their criticism of Chancellor of the Exchequer George Osborne's decision to raise the top rate of tax on profits from offshore production in the last budget. They have argued that investment in what is a mature and declining basin risks being stymied by an unpredictable and onerous tax regime.
Greening, who was speaking at an industry conference here, said the new forum would include representatives from the Treasury, lobby group Oil and Gas UK and senior officials from the Department of Energy and Climate Change. By meeting on a regular basis, the forum would help the industry get more clarity on potential changes to the tax regime, and discuss possible future tax relief, such as decommissioning.
"What we will try to do is put some certainty in that. Now, obviously we can't always tie the hands of governments going forward, [but] I think what we can do is look to see to what extent we can find a way through this," said Greening.
Head of Oil and Gas UK Malcolm Webb said he was encouraged by the discussions.
"It was a very constructive meeting," said Webb.
However, Greening said it was impossible to say whether the issue around decommissioning would be resolved in time for the next budget
"I'm not going to put a timeline on it. What I can say is we've got a couple of working groups set up, one of them around decommissioning and we would like to very constructively work with the industry on that and we've been encouraged by the progress made. But let's be clear. If sorting out a long-term solution to decommissioning was easy it would have been sorted out a long time ago. We absolutely want to work on this as fast as we can. But what I think matters is getting the right long-term solution, one that stands on its own two feet," she said.
Webb said that although there was still lingering frustration over the unanticipated nature of the earlier tax increase, it was time for both industry and government to look to the future.
"There's some regret, but what the industry is determined to do is to turn the page to overcome the problems that the government has presented us with, and we really were encouraged [by the meeting] today."
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