Chancellor George Osborne has promised the first North Sea tax cuts in two decades – and said they would protect tens of thousands of jobs in the “vital” offshore sector. He used his Autumn Statement to outline eagerly anticipated measures to boost the industry, with Chief Treasury Secretary Danny Alexander due to unveil the full package in Aberdeen today.
Oil market analysts are debating if oil will fall to $50. In North Dakota, prices are already there. Crude sold at the wellhead in the Bakken shale region in North Dakota fell to $49.69 a barrel on November 28, according to the marketing arm of Plains All American (PAA) Pipeline LP. That’s down 47% from this year’s peak in June, and 29% less than the $70.15 paid for Brent, the global benchmark.
Offshore firms will be offered new tax breaks today to trigger a fresh wave of North Sea exploration, it can be revealed. Energy Voice has learned that Chief Treasury Secretary Danny Alexander will reveal plans to try to end the UK's exploration crisis through a system of tax credits for seismic surveys. The move is expected to be welcomed by industry leaders who have repeatedly called for extra incentives to stimulate flagging exploration rates.
Chancellor George Osborne took the floor yesterday for what is the last Autumn Statement before the next general election, and probably the current Government’s final opportunity to impact the economy. But given the fiscal position the Government finds itself in with the budget deficit remaining high and with tax revenues lower than expected, was the Chancellor able to deliver any December cheer for the oil & gas industry? Well, we definitely saw a number of positive items. The Government restated its support for both the onshore and offshore oil & gas industries, with a mixture of tax and other incentives such as the allocation of £31m to fund the creation of a world class sub-surface research test centre through the National Environmental Research Council.
We watched yesterday's Autumn Statement from the Chancellor George Osborne, with feelings of hope and trepidation. We understand the economic constraints under which today’s Autumn Statement is delivered and there’s consensus in our offices this afternoon that the immediate reduction of two percentage points in its tax rate is an important first step towards improving the fiscal competitiveness of the UK North Sea – but, without question, more needs to be done.
The FTSE 100 Index finished 25.5 points lower at 6716.6 as continued volatility in oil prices - with Brent crude trading at just below 71 US dollars a barrel - pegged back the performance of commodity stocks. Royal Dutch Shell was in focus after spiking yesterday on the back of speculation linking it to a merger with BP. Shares fell back 33p to 2259p but BP rose another 3p to 436.85p.
Wave energy company Aquamarine Power has announced plans to “significantly” downsize its business. It means an undisclosed number of jobs will be lost. According to CEO, John Malcolm, “this will involve retaining a core operational and management team to run the business and continue maintaining our Oyster 800 wave machine at the European Marine Energy Centre in Orkney”.
Official figures show that North Sea tax receipts are predicted to fall by 40% over the course of this year. The Office for Budget Responsibility (OBR) said revenues to the Treasury would drop to £2.8billion by the end of 2014/15, which is 0.9% lower than was forecast at the Budget in May. The independent body also said that tax to the Exchequer from the North Sea would be £1.6 billion lower in 2015-16 than was predicted in March, with “smaller reductions” due in later years.
Oh well, the North Sea is being kept on tenterhooks for a few more hours, with Treasury first secretary Danny Alexander scheduled to deliver the supposed main news today tomorrow. All chancellor Osborne was prepared to do was trail a few crumbs without even mentioning the North Sea fiscal review, let alone whether it will be the cornerstone of the Alexander delivery, though it of course will be. Just three measures were mentioned in his Autumn Statement address: “I can tell the house today that we will go ahead with an immediate reduction in the rate of the supplementary charge from 32% to 30%, we will expand the ring-fenced expenditure supplement from six to 10 years and we’re introducing with immediate effect a new cluster area allowance.”
Chancellor George Osborne has confirmed that he will cut North Sea oil and gas taxes. He pledged to reduce the supplementary charge from 32% to 30%, expand the ring-fenced expenditure supplement from six to 10 years, and introduce a new cluster area allowance. The UK Government insisted that the changes would trigger billions of pounds of investment in the North Sea and create thousands of new jobs. The cut in the supplementary charge represents a partial climb-down by the chancellor, who infamously almost wiped out investment at a stroke when he hiked it from 20% to 32% without consultation in 2011.
The FTSE 100 bounced back yesterday as stronger commodity stocks helped it more than recover the ground lost in a 1% decline over the previous session. The rebound came as the price of Brent crude rose to $71 a barrel, having slumped to a five-year low close to $67 on Monday after Opec ministers failed to cut production.
Offshore leaders are poised to find out if UK ministers will move to resuscitate the North Sea sector – or stand by as price falls hammer a "nail in the coffin". Chancellor George Osborne is under pressure from oil and gas chiefs to provide major new tax breaks for the industry when he delivers his Autumn Statement to MPs today. The Treasury is due to publish its review of the North Sea tax regime, which was launched at the Budget in March, against a backdrop of plummeting world prices and soaring costs which experts fear could put projects and jobs at risk.
The falling oil price has caught-out investors in a retail bond linked to a leading North Sea producer. EnQuest issued the bond two years ago, offering an attractive 5.5% interest rate until 2022. The company used it to raise £155million to help develop the Kraken field off the Shetland Islands.
BG Group has revised the salary package for its new chief executive Helge Lund following a backlash from shareholders. Mr Lund, who has been likened to Real Madrid and Portuguese footballer Cristiano Ronaldo because of his superstar status in the global oil and gas industry, was set to get a £12million “golden hello” in shares and the chance to earn £13.5million a year if he hits performance targets. Mr Lund’s share award has been cut from £10million to £4.7million.
A fresh slide in the price of oil to a five-year low triggered more pain for energy stocks today as the London market started the week on the back foot. The slump was accompanied by a rout across the commodities sector as the FTSE 100 Index dropped by 71.7 points to 6650.5. With Brent crude now firmly below the 70 US dollars a barrel mark, shares in exploration firm Tullow Oil topped the fallers board with a dive of 8%, off 34.3p to 391.7p.
Energy firms and airlines were big movers today after the decision by Opec ministers not to cut output triggered a further fall in oil prices. With Brent crude at a fresh four-year low of 72 US dollars a barrel overnight, the FTSE 100 Index tumbled 40.1 points to 6683.3 on the back of sizeable declines for some of the City’s biggest stocks. BP was down 3%, or 14.15p to 412.25p, and rival Royal Dutch Shell slid by 65p to 2200.5p. Oil and gas exploration firm BG was the biggest faller in the top flight with a decline of more than 7% or 73.8p to 912.9p, while energy services firm Weir declined 152p to 1808p.
Norwegian Energy Co. ASA plunged to near a record low after writedowns on two of its oil fields exceeded earlier estimates, leading to a probable breach of cash covenants at the end of the year and through next. The stock traded 14 % lower at 1.8 kroner a share at 10:21 am in Oslo, extending a losing streak to four consecutive days. It is trading near the lowest since the shares were listed in 2007.
Declining oil and gas production saw UK stocks fall for the third straight day.
Western Europe’s biggest crude producer said it won’t adjust spending to match any decline in oil revenue after a decision by OPEC to maintain supply levels triggered a slump in the price of oil. Norway’s government can’t redraft its budget because of what may turn out to be a temporary shock to prices, Finance Minister Siv Jensen said yesterday in an e-mailed reply to questions. Instead, she signaled the central bank is better equipped to address such disruptions. The comments come as the krone suffers its biggest pummeling in more than five years as traders speculate lower oil prices will hurt Norway’s economy.
OPEC’s decision to cede no ground to rival producers underscored the price war in the crude market and the challenge to U.S. shale drillers. The 12-nation Organization of Petroleum Exporting Countries kept its output target unchanged even after the steepest slump in oil prices since the global recession, prompting speculation it has abandoned its role as a swing producer. Yesterday’s decision in Vienna propelled futures to the lowest since 2010, a level that means some shale projects may lose money.
Weaker oil stocks hit the FTSE 100 Index today as prices tumbled to a four-year low on expectations that Opec will not take action to cut production. BP, Royal Dutch Shell and Petrofac were among the fallers as the FTSE 100 remained close to its opening mark at just 5.2 points higher at 6734.4. The cost of Brent crude dipped to around 76 US dollars a barrel, a third below its level in June, as members of the Opec oil cartel gathered in Vienna. Saudi Arabia, which dominates the 12-member organisation, has downplayed the likelihood of a cut in production, with oil minister Ali Naimi arguing that the market would eventually “stabilise itself”.
The US stock market eked out another record close ahead of the Thanksgiving holiday as investors assessed the latest reports on the economy and some corporate earnings. However, energy stocks were once again the biggest loser of the 10 industry groups represented in the S&P 500 index as the price of oil dipped again.
The oil market will “stabilize itself,” Ali Al-Naimi, Minister for Saudi Arabia, the world’s largest crude exporter, said in Vienna yesterday. The comment will keep people guessing before today’s meeting of the Organization of Petroleum Exporting Countries in Vienna, said Harry Tchilinguirian, head of commodity markets at BNP Paribas SA. Here are some potential outcomes:
Oil slid to a four-year low amid concern OPEC won’t agree to cut output at today’s meeting while gold fell. European equity-index futures rose as Chinese shares traded at a three-year high, and the yen gained a third day. West Texas Intermediate crude tumbled 1.3 percent to $72.75 a barrel by 7:12 a.m. in London, falling for a fourth straight day. The Shanghai Composite Index closed at the highest since August 2011 amid record turnover. Euro Stoxx 50 Index contracts increased 0.2 percent while Standard & Poor’s 500 Index futures were little changed after the U.S. gauge rose to a record. Samsung Electronics advanced as much as 8.3 percent in Seoul after saying it will buy back shares. The yen gained 0.3 percent and Russia’s ruble fell 0.8 percent.
A stunted demand market saw Seadrill fall to a record low for the past six years. A "difficult" move to suspended the offshore driller’s dividends spurred the slide. The firm fell 16% to NOK118.8. The offshore driller, which is controlled by billionaire John Fredriksen, was hit by a weakened demand for rigs and faltering oil prices. Seadrill is currently sitting at its lowest valuation level since July 2010. Speaking about the suspension, Fredriksen insisted it was a “difficult” decision but equally necessary to weather the current market climate.