Energy specialist corporate finance firm Simmons & Company International said measures taken by the UK Government have fallen short of the ‘radical shot in the arm’ the UKCS (UK Continental Shelf) needs.
The company said the changes were a move in the right direction, but said the North Sea oil and gas industry still faces higher levels of taxation compared to other industries.
Changes include a 10% reduction in the supplementary charge, while the PRT (Petroleum Revenue Tax) is also set to be reduced from 50% to 35% to support continued production in older fields.
Industry body Oil & Gas UK said the measures lay “strong foundations for regeneration of the UK North Sea”.
Chief executive Colin Welsh said: “Today’s measures are akin to a patient requiring a massive shot of adrenaline but instead being handed an oxygen mask. What we see is a definite move in the right direction but the combined measures do not amount to a game changer for the UKCS.
“Oil and gas has been an unloved industry in the UK for a long time. There is now recognition that the cash cow is ailing and needs attention. The industry has been beset by negative surprises in Budgets over the years so today is a step towards rebuilding confidence.
“It recognises the contribution oil and gas has made to the UK and acknowledges that it needs help in its now mature and relatively less competitive years. In that sense, we can take comfort that notice has been taken of what industry has been telling Government.
“There is a degree of confidence that crude prices will recover in the latter part of 2015 and hopefully the new Oil & Gas Authority, which has been established to implement the recommendations of the Wood Review, can build on these measures and a price recovery to ensure that we end up with an industry with a good chance of maximising the potential of the remaining resources in the UKCS.”
For more analysis on the budget, click here.
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