Industry NewsThe UK's oil and gas industry has warned that the new tax measures in the Budget threaten jobs and investment in the sector. Producers are facing an increase in their taxes to pay for lower Duty rates at the pump. The trade body representing the sector has indicated that the move could see players pulling out of the North Sea, increasing the reliance on imports.
Trade body, Oil & Gas UK reacted angrily to the Budget delivered by Chancellor George Osborne. The reduction in Fuel Duty and the accompanying increase in offshore taxation was something of a surprise. The industry has underlined this is contrary to what the Coalition Government had promised for the sector – stability in regulation and taxation. The attack comes despite the Government indicating it would be working with the oil and gas industry on decommission costs, something the sector has been raising an issue on for some time. The main changes for the oil and sector will be an increase in the Supplementary Charge on production from 20 per cent to 32 per cent. However, this increase will only be operational while oil prices are high and will be scaled back if the wholesale rate falls below $75/barrel. As such, producers can mitigate the cost of the higher tax by selling the oil at the higher price. The tax is estimated to cost the industry 2 billion pounds.
The Government has underlined, however, that the industry will be watched so that they do not simply pass on the cost of the tax to consumers. Danny Alexander, the Chief Secretary to the Treasury, stated, "If the oil companies try to pass that on to retailers they will simply buy their fuel from elsewhere. You've got a global market for oil and you've got a competitive market for the supply of fuel, so there is no prospect of that being passed on."
On the Budget itself, Malcolm Webb, Chief Executive of Oil & Gas UK, commented, "The move runs counter to the Government's stated desire to promote growth, jobs and exports – all of which this industry was delivering and will now find much more difficult to sustain." He added, "Importantly, it will also most likely increase this country's dependence on imported oil and gas and thus diminish its energy security. Many of our members will now be reappraising their investment decisions."