The UK is “out of step” with the times, environmental campaigners warned after a Budget that was lacking in measures to tackle climate change. In the run up to crucial international talks in Paris, at which it is hoped a new climate treaty can be agreed, the only mention of the issue in George Osborne’s speech was on removing the climate change levy exemption for renewable power. The Treasury said the removal of the exemption, which allows businesses not to pay the environmental tax levied on energy if it has come from renewable power, would prevent tax-payers’ money benefiting clean electricity generated abroad.
The Chancellor's first all-Tory Budget delivered "no real surprises" for the North Sea oil and gas industry, according to a leading tax expert. Richard Britten joined the Energy Voice team at its offices to watch the Budget live in the newsroom. The Government reinforced its previous pledges to reduce the North Sea’s supplementary tax charge from 30% to 20%.
Chancellor George Osborne insisted the government would deliver on its promise to reduce the North Sea's supplementary tax charge from 30% to 20%. He also announced a move to open up the remit for industry investments to qualify for allowances - a move aimed a fueling production.
Chancellor George Osborne has reinforced the Government’s pledge in March to move ahead with tax reforms for the North Sea oil and gas industry. The Government was previously urged by industry leaders to help support production and investment in the UKCS. Speaking before parliament in the House of Commons, the Chancellor said previous promises – including a reduction in the supplementary tax charge from 30% to 20% would continue.
The first all-Tory Budget in almost two decades is set to be divisive as further dramatic welfare curbs are included with Chancellor George Osborne promising to "secure Britain's future". The Budget is also set to take advantage of better-than-forecast tax revenue to declare that £12billion of welfare savings will be implemented more slowly than previously thought.
As Chancellor George Osborne gets ready to deliver the first Conservative budget in 18 years Energy Voice looks back at the North Sea tax changes delivered pre-election and what to expect today. In March, as the Liberal Dem and Conservative coalition geared up for the May vote, the Treasury introduced a raft of measures seen as long overdue by the North Sea oil and gas industry.
Firstly, seeing everyone else has had a crack at it I’d like to comment on George Osborne’s fiscal plan for the oil & gas industry. To be honest I was somewhat underwhelmed by the chancellor’s tax plans for the UK oil & gas industry. I still believe that Labour’s Supplementary Charge should be scrapped completely and I am very disappointed – although not at all surprised – that exploration incentives are now going to be consulted on when the Treasury has had over a year to come up with a plan. It’s also clear now that the so-called bareboat charter tax aimed at preventing drilling contractors and others from not paying their full whack of tax in the UK is going ahead in some form or another and I’m told, may be rolled in with the new rules on taxation of overseas companies such as Amazon or Google who have been accused of shifting profits overseas and thus avoiding their full UK tax liabilities.
Recent plummeting oil prices have demonstrated the volatility of the industry and the need for governments to plan budgets on the basis of potentially “enormous forecast errors”, the chairman of the Office for Budget Responsibility (OBR) has told MSPs. The sector was hit after the price of Brent crude oil dropped to below 50 US dollars (£33) a barrel, having been at about 110 US dollars (£74) between 2010 until midway through last year. Robert Chote told Holyrood’s Finance Committee that such changes demonstrate the high degree of difficulty economists face when trying to forecast receipts. The OBR, set up to provide independent analysis to the UK Government, has downgraded its projections for oil receipts in 2016-17 from £2.4 billion in December to £600 million, and it is forecasting less than £1 billion each year until 2019/20.
The “welcome and long-awaited” oil and gas tax measures unveiled in the Budget will help drive new investment in North Sea exploration and production, the boss of Aberdeen firm Plexus Holdings said yesterday. Plexus stands top gain from the tax cuts and incentives announced by Chancellor George Osborne last week, Ben van Bilderbeek, the oilfield technology company’s founder and chief executive, added. Particularly helpful is the new cluster allowance to support the development of high pressure, high temperature (HP/HT) projects and encourage exploration and appraisal activity nearby, he said.
Today,March 20, is apparently the international day of happiness, inaugurated by the United Nations in 2012! Does the oil and gas sector share that happiness after the end of an eventful week? The start of the week saw a clarion call from Sir Ian Wood for the Chancellor to act decisively in reforming the North sea fiscal regime. Without decisive action Sir Ian warned of job losses of up to 100, 000 as the industry continues to struggle to come to terms with the oil price slump.
A North Sea leader has warned that more jobs will have to be cut in the sector despite a “regeneration” package announced in the Budget. Malcolm Webb, chief executive of Oil and Gas UK, said the industry must put pressure on itself to reduce costs and improve efficiency, but urged firms to do it in a “careful” way. He was speaking the day after the Treasury met demands for greater support during the downturn, announcing cuts to the supplementary charge, petroleum revenue tax and incentives for exploration. Scottish Secretary Alistair Carmichael claimed on Wednesday that the measures would help protect thousands and potentially tens of thousands of jobs. However, Mr Webb said there were still difficult decisions to be taken in the offshore sector.
Energy specialist corporate finance firm Simmons & Company International said measures taken by the UK Government have fallen short of the 'radical shot in the arm' the UKCS (UK Continental Shelf) needs. The company said the changes were a move in the right direction, but said the North Sea oil and gas industry still faces higher levels of taxations compared to other industries. Changes include a 10% reduction in the supplementary charge, while the PRT (Petroleum Revenue Tax) is also set to be reduced from 50% to 35% to support continued production in older fields.
Urgent reform of the oil and gas tax regime is essential to encourage exploration and ensure the North Sea is competitive for investors, Deputy First Minister John Swinney said.
The Chancellor has been urged to help energy intensive industries in the upcoming Budget. The manufacturers organisation EEF is pressing George Osborne to avoid a pre-election “giveaway” in the upcoming Budget and instead focus on boosting economic growth.
Canacol Energy has increased its budget for 2015. The Colombian-based firm has upped its spending in light of newly acquired contracts and a major gas discovery. Last year, the company executed three new gas sales contracts for a combined 65 million standard cubic feet per day.
Marathon Oil has estimated its investment and exploration budget will be 20% lower for 2015. The company said the capital program of around $4.5billion for next year will reflect a significant weighting to the company’s high return investment opportunities in the US as well as lower exploration spending. Marathon said the “continuing dynamic change” in crude oil markets, together with the expected impact to oilfield service cost, mean it will need additional time before the budget is finalised.