So last nights news had an article on it about the oil industry wanting a better/modified/aligned (read:less) tax regime in the UK. It seemed that the politicians are considering doing this, despite us already picking up bills for decommissioning oil platforms etc.

But, we seem to have squandered so much of the oil revenue and resources. We also have some seriously rich people leading the calls for this.

Meanwhile, elsewhere, it seems that the other nations are starting to see the tide turn against fossil fuels.

Are we seriously going to give the oil industry a tax break?

Rich people in wanting more money shocker!

Things are slowing down in O&G so it isn’t surprising, because everyone is so short sighted I wouldn’t be surprised if they succeed. Rate cuts are already on the board http://www.heraldscotland.com/business/company-news/wood-group-warns-of-10-cuts-in-pay.24155768

Presumably if they don’t get a more competitive tax regime they will leave and go somewhere else…

despite us already picking up bills for decommissioning oil platforms etc

The tax payer does not pick up this bill. The oil companies are requried to have money set aside to do this and selling the asset to another operating company doesn’t mean you can necessarily get away with this.

The question isn’t so much as giving a tax break to oil compnies rather it is more like reducing the huge tax bill that is currently paid by some operations. The field I work on (yes I’m declaring an interest here) currently pays tax on it’s oil production at 81%. Name another industry where such tax rates apply.

It’s amazing the oil companies aren’t all going bust at that rate. I wonder what other industries could sustain such a tax rate and still turn a healthy profit?

My understanding is that the current tax regime has resulted in significant reductions in new developments in and around the UK, some of which are directly related to our near immediate energy security.

My understanding is that the current tax regime has resulted in significant reductions in new developments in and around the UK, some of which are directly related to our near immediate energy security.

That can be the case for some new develpments, although the reduction still results in a pretty high tax rate. The issue is that there is quite a bit of oil left in the fields that are subject to the old tax regiem that won’t be developed because the tax rate makes is uneconomic.

gonefishin » The field I work on (yes I’m declaring an interest here) currently pays tax on it’s oil production at 81%. Name another industry where such tax rates apply.

It’s amazing the oil companies aren’t all going bust at that rate. I wonder what other industries could sustain such a tax rate and still turn a healthy profit?

It’s a bit missleading that it’s refered to as ‘tax’ (IMO), it’s more allong the lines of the compnay pays the tresury $81 for every $100 proffit it makes getting it out of the ground. You could write that the other way and say it’s a national asset, and we’ve subcontracted the extraction and pay them 19% of the profit for doing it.

We also have some seriously rich people leading the calls for this.

That story also deals with ‘average’ people. Nothing stopping anyone with an engineering degree moving to Aberdeen and being the “grandson who’ll be on £100k by the time he’s 25”.

Yes, I support less tax on oil industry so long as they reduce their price as well.

It’s a bit missleading that it’s refered to as ‘tax’ (IMO), it’s more allong the lines of the compnay pays the tresury $81 for every $100 proffit it makes getting it out of the ground. You could write that the other way and say it’s a national asset, and we’ve subcontracted the extraction and pay them 19% of the profit for doing it.

Not really as all the UK government has said is “if you happen to find some oil under the sea, develop the plan to extract it, design, build, and operate the required facilites we’ll pay you 19% of the value to extract it.” It’s not like the government hands over fully designed platforms to the operators and says “there you go”.

Having said that it’s a matter of semantics and there will always be a balance between getting the maximum value for “UK PLC” and making sure that the companies are willing operate here.

Well said tinas . Im not on 100k but if i motivated my self and sucked up to the right people i could be ……

Im not sure its necesserally lower taxes that are required for investment but guarantees against the rates that they will pay.

As has happened to often – companys have invested billions in infrastructure at a projected tax rate and the goverments hiked it up . Too much money invested to walk away , they are trapped.

This drives off future investment.

How ever this happens all over the world.

Right but extraction of natural resources is different from other industries because the product of value has been created by nature, not the extractor. It’s not surprising that it gets a high rate of tax.

Im not on 100k but if i motivated my self and sucked the right people i could be ……

FTFY

Happens in every industry, an argument for nationalisation I suppose but without the knowhow and tech where do you begin?

Haha , dave thats what i was alluding to without being so blunt.

One of the prior governments (Labour?) put taxes up sharply and a number of north sea oil projects where cancelled as they where not financially viable.

The oil industry is justified in calling for lower taxes.

The government should be focusing it’s tax efforts on companies s abusing EU laws such as Goolge, Amazon, Apple, Starbucks etc domiciled in Ireland and Luxembourg.

put taxes up sharply and a number of north sea oil projects where cancelled as they where not financially viable.

Yup, there seems to be a lot of people talking about taxation of industry like it is punitive for making lots of profit. Surely the point is to maximise the total amount of money raised. So if the level of taxation is making new developments uneconomical, then lower taxation may be the answer and the government and the rest of the country in general receives a smaller piece of a larger pie.
And if anyone is arguing for higher taxation to try and drive the use of oil down you need to look a little more carefully into the availability and cost of alternatives.

Natural resources are slightly different through, if you put up taxes on call centers or manufacturing then those jobs would go abroad where they cost less to do. But oil is where it is, and is finite and appreciating in value. So taxation only has to make it more viable to extract it than elsewhere in the world. And if they slow down production by upping taxes the stock lasts longer than it would and is worth more in the future.

Labour upped the tax when the value hit >$150/barrel, the oil companies were still making more money per barrel after tax for a couple of years than the oil had been worth a few years before!

I think we should keep the taxes high and leave the oil in the ground, against future need.

Oil isn’t just an energy source, a lot of what we make/ need has products of oil in it.

Conservative George Osborne gave ca £2bn support to fossil energy in energy in the United Kingdom in 2013 (wikipedia)
how does that fit with the tax bill?

Conservative George Osborne gave ca £2bn support to fossil energy in energy in the United Kingdom in 2013 (wikipedia)
how does that fit with the tax bill?

Well if I’m reading this

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323371/140620_UK_oil_and_gas_tables_for_publication_in_June_2014.pdf

correctly the total revenue paid to the UK gov from oil and gas in 2013-14 was £4.7billion with the previous year being £6.1billion.

So taxation only has to make it more viable to extract it than elsewhere in the world.

It has always been more viable to extract oil elsewhere but the oil companies stay in the UK sector as it is seen as a safe and politically stable place to operate so that balances out the higher risk stuff elsewhere.

And if they slow down production by upping taxes the stock lasts longer than it would and is worth more in the future.

It’s a bit more complicated than that I’m afraid. The facilites that are need to extract the oil aren’t going to last for ever, they have a limited life left and a lot of the marginal fields are only viable IF they can be extracted via existing infrastructure and once that is gone they won’t be extracted at all.

What gone fishing said.

Ive been involved in salvage completions on 1970s era facilities .

Some of them only produce 50 barrels per day and are only being salvaged because the infrastructures not being used for anything else atm and it has spare capacity – some of those facilitys wont be around much longer.

Conservative George Osborne gave ca £2bn support to fossil energy in energy in the United Kingdom in 2013 (wikipedia)

I think that wads when he cancelled the windfall tax they’d levied the previous year…

I hear rumours of a perfectly viable gas well not very far from where I’m sat now that had to be capped due to being discovered during a period of unfavorable taxation.

Pushing up taxes will push up prices and the consumer will suffer

Unfortunately the UK is past it’s best…certainly to the oil majors who have opportunities elsewhere and where higher rates of return are available to ensure investor dividends are maintained.

However, stable and favourable fiscal policy can assist with investment in the UK v elsewhere.

Take a look at the top 10 producing UK oil fields in 2013. Daily avg boe which is woeful but money still being made when oil is >$110/bbl. That said some operators opex/bbl is rumoured to be not too far short of that….

The oil and gas industry has provided a great opportunity for many people who would never have travelled and earned without it being here.

There’s no rumour about it. My previous platform had a break-even point of ~5000 bbls/day. They were lucky if they made 4000/day when I left.