5 May 2011 | Tierney Smith
Carbon, Construction, Energy, Finance/insurance, Legislation, Europe

 

Representatives from Oil and Gas UK, an industry body, told a House of Commons committee that the tax rises announced in the budget would hit North Sea investment.

The budget announcement, which saw supplementary tax on production rise from 20 per cent to 32 per cent in order to fund the cut in fuel duty, has caused concerns about a “dramatic drop in confidence”. This could see as much as £2 billion worth of investment which would have gone into the North Sea industry, invested elsewhere.

Giving evidence to the Commons Energy and Climate Change Committee, Oil and Gas UK said this would mean as many as 30,000 less jobs in the industry, throughout all stages of production, as they said the announcement came out the blue, and called for more predictability.

Steve Jenkins, chairman of the Oil and Gas Independents Association said: “Encourage exploration and look to the future. Don’t look to the run up to the next general election but to the next 100 years.”

The representatives from the oil and gas industry also claimed they did not believe the Department of Energy and Climate Change or Energy Secretary Chris Huhne, had been consulted about the rise of up to 81 per cent in some field tax rates announced in the budget 2011, and were only informed by the Treasury at the last minute.

Asked repeatedly by the committee chairman, Tim Yeo, whether this was true, Huhne insisted that it was government policy not to discuss any consultations taking place in the run up to the budget.

Huhne, along with Justine Greening, representing the Treasury, stood by the tax rise. While saying they knew the decision on the supplementary tax would not be welcomed by the oil and gas industry, they said it was the best option to “strike that balance.”

Greening said the decision would pay for the fuel duty cut, which would help households, motorists and businesses, while impacting investment in the industry only marginally.

Huhne said: “As we know last year’s price for Brent Crude was about $80 per barrel. We are now looking at a price more around $125.”

He also said the measures were necessary in the current fiscal circumstances where “the Chancellor has to square the circle of inheriting a situation where we were spending 113p for every one £1 that was coming in.”

Greening also said the trigger point; currently set at $75 a barrel would provide security for investments in oil. If oil prices fell below this then the supplementary tax would be reduced once again.

She said: “We were very clear in the Budget that we set a trigger price at which point the supplementary charge would be coming back down to 20 per cent.

 “That is precisely to address the scenario where the oil price would fall, and in that scenario we would not want to damage investment.”

 

Image: Stocchi | flickr

blog comments powered by Disqus