Letter: Tax that could dry up North Sea oil revenue
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Your support makes all the difference.Sir: We, the undersigned, former chairmen of the Petroleum Exploration Society of Great Britain and/or the Petroleum Group of the Geological Society, wish to draw your attention to the absence of comment in the press on proposals in the Budget for the most fundamental tax changes to affect the North Sea oil and gas scene for 10 years. This is because the outcome of the proposed changes is not obvious.
The tax changes mean that, while on existing fields the marginal rate has been reduced from 83 per cent to 67 per cent, exploration costs can no longer be offset against the tax. The big losers are undoubtedly North Sea exploration and the research, creativity and enterprise that have made the British sector such a success story.
The immediate result is likely to be a reduction of exploration drilling to about one-third of its current level. In the short term the most seriously affected will be the drilling contractors, the whole of the North Sea service industry and towns such as Aberdeen where these are based. Companies which are currently active in North Sea exploration will divert their efforts overseas. In the longer term there will be fewer discoveries of oil and gas, and a decline in industries connected with their development. Yet last year the North Sea was the biggest single user of British manufactured products. The future for all our industries looks bleak.
Those who lose their jobs will not be comforted if they eventually discover that this was by miscalculation rather than design. But the real loss will be to the country as a whole, and this will not be felt for five to ten years when significant jobs and revenues from the North Sea have become a distant memory and the UK no longer provides a base of oilfield expertise for overseas ventures.
Yours faithfully,
R. F. P. HARDMAN, M. BADLEY, J. M. BOWEN, J. BROOKS, A. S. COCKETT, J. G. C. M. FULLER, P. HINDE, G. HEARD, B. G. LIGHT, J. R. PARKER, R. STABBINS, A. J. WOODROW
London, SW8
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