Tullow cites 'stable Dutch tax regime' in N. Sea deal

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, May 24 -- Tullow Oil PLC, emphasizing expected tax benefits in the Netherlands, has entered into an agreement to acquire Nuon Exploration & Production BV from the Vattenfall Group for €300 million in cash.

"This acquisition is a natural fit with Tullow's southern North Sea portfolio and materially enhances our potential for growth in the Dutch sector, an area with significant opportunities and a stable tax regime,” said Tullow Chief Operating Officer Paul McDade.

For Vattenfeld, the sale is in line with the firm’s new strategic direction, which includes a strong focus on the group's operations on core markets and core assets. Vattenfeld said the main drivers for the strategic direction “are to create financial flexibility and to reduce carbon dioxide exposure.”

Nuon E&P currently holds interests in 35 producing gas fields in the Dutch North Sea as well as interests in the Den Helder processing plant and pipeline along with other associated infrastructure.

Tullow said the Nuon E&P acquisition will enhance its North Sea business adding a portfolio of 25 licenses, including more than 30 producing fields, numerous development and exploration opportunities, along with ownership of other key assets.

The portfolio will increase Tullow’s North Sea gas production by 9,000 boe/d to 23,000 boe/d and add reserves and resources of 28 million boe,” Tullow said, noting that the transaction has an effective date of Jan. 1, with completion expected by July.

McDade said Tullow sees a lot of opportunity for development and exploration spend in the Dutch sector of the North Sea, adding that the instability in the UK sector from a tax perspective doesn’t help to sustain investment.

McDade said the UK’s recent tax increase has been extremely punitive, with the tax on oil production profit rising to 62% from 50% in this year’s budget.

Tullow is not alone in expressing displeasure with the new UK taxes.

Earlier this month, other international oil companies operating in the UK voiced their displeasure with the tax hikes, writing in a collective letter to London's The Times that investor confidence has been damaged by the increases.

"Investor confidence has been severely damaged by this policy," said chief executives and senior executives of companies, including Centrica PLC, E.On AG, Total SA, Royal Dutch Shell PLC, and BG Group PLC (OGJ Online, May 16, 2011).

Contact Eric Watkins at hippalus@yahoo.com.

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