Oil & Gas UK rebuts industry-subsidy claim

Oil & Gas UK has issued a sharp rebuttal to reports that UK producers enjoy generous governmental subsidies.

Although a prepared statement by the trade group didn’t name the source of the claims, news media have been reporting results of a joint study by Overseas Development Institute (ODI), London, and Oil Change International, Washington, DC, alleging governments of G20 countries spend $88 billion/year “subsidizing exploration for fossil fuels.”

ODI describes itself as “a think tank on international development and humanitarian issues.” Oil Change International says it’s “a research, communications, and advocacy organization focused on exposing the true costs of fossil fuels and facilitating the coming transition towards clean energy.”

For the UK, the study cited as subsidies the field allowances granted under the country’s complex tax scheme, which it said totaled $4.5 billion for 54 fields during September 2009-September 2014.

In a prepared statement, Malcolm Webb, Oil & Gas UK chief executive countered, “It is disingenuous and misleading to suggest that the offshore oil and gas industry has been a recipient of subsidies.”

The offshore oil and gas producing industry is taxed at rates as high as 81%, he noted, claiming it “pays more tax into the Exchequer than any other corporate sector.”

Webb argued: “To describe tax allowances on capital investment as subsidies is to imply capital expenditure should be taxed. It is extremely worrying that this notion is being shared by media, especially at a time when this country is in such serious need of capital investment and the economic growth which it brings.”

He said the industry receives “limited allowances from 62% to 81% taxes on profits for marginal investments, with the rate of tax never going below 30% vs. 21% for the majority of British businesses.” Rates revert to 62-81% after allowances have been used.

Rising costs and diminishing discovery size on the mature UK Continental Shelf have raised concerns about attracting investment needed to develop remaining oil and gas reserves estimated as high as 24 billion boe.

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