Britain imposes new tax on rig charters

Offshore staff

LONDON – Oil & Gas UK has welcomed the UK government’s review of the industry’s tax regime.

Chancellor George Osborne outlined measures in his annual budget to address some of the challenges operators are facing in the UK North Sea.

Oil & Gas UK supported a consultation on a new allowance to stimulate investment in ultra-high pressure/high temperature (u-HP/HT) oil and gas field clusters.

However, the association was confounded by Osborne’s decision to change the basis for taxation of drilling rigs and accommodation vessels using bareboat chartering arrangements. It claimed this measure could have a negative impact on UK exploration and development activity.

Chief executive Malcolm Webb said: “It is perplexing given today’s other good news that the government has chosen to proceed with the bareboat measure. This can only increase costs on the UKCS [UK continental shelf] where operating costs have increased sharply in recent years and last year saw a rise of 15.5% to an all-time record of £8.9 billion [$14.67 billion], and new developments are facing similar cost pressures.

“In addition, we fear that this move will drive drilling rigs, already in short supply, out of the UKCS. Exploration over the last three years has been at its lowest in the entire history of the industry in the UK, with only 15 exploration wells drilled in 2013.”

Webb was more impressed by the government’s decision to implement all the recommendations in Sir Ian Wood’s report on the UK offshore sector’s future. “We also applaud the oil and gas fiscal regime review and look forward to playing a full and constructive role in that.”


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