The UK Government’s shock plan to target the North Sea oil and gas business for £10billion over the next five years drew widespread criticism last night.
One expert said many companies would now be frantically reappraising their plans for capital investment in the UK, while another said the North Sea had suddenly become a much less attractive place to be.
Industry leader Malcolm Webb, chief executive of Oil & Gas UK, said: “In its first Budget nine months ago, the government recognised the importance of a ‘stable’ oil and gas tax regime which provided certainty for investors.
“Given that assurance, the industry is shocked to now be hit by a tax increase that raises the tax rate to at least 62%, with some of the most mature and therefore vulnerable fields now paying up to 81%.
“Today’s move runs counter to the government’s stated desire to promote growth, jobs and exports.
“At a time when we could see investment recovering following the last period of fiscal instability, this further shock will only damage investor confidence.”
Ian Bell, director of engineering consultant Optimus (Aberdeen), said: “Every chief executive operating assets in the North Sea is going to put on hold any non-sanctioned project until they can establish how this will impact their profitability. The growth in North Sea jobs that was being predicted before today seems a bit premature. I’d go as far as to predict the chancellor has just brought the recession to Aberdeen. Thanks for nothing George.”
Aberdeen and Grampian Chamber of Commerce chief executive Bob Collier said: “The government’s announcement is a short-sighted and potentially very damaging approach.”
Callum Wilson, a tax partner with Johnston Carmichael, said the government move was a smash-and- grab raid on the industry.
“This will lead to major uncertainty in an important Scottish industry that was just coming out of the doldrums.”
Martin Findlay, head of oil and gas tax for KPMG in Aberdeen, said: “The proposed tax increases can only reduce the attractiveness of investment in the North Sea.”
Derek Leith, oil and gas partner at Ernst & Young, said: “Many companies will be frantically reappraising their plans for capital investment in the UK in the coming days.”
Derek Henderson, senior partner at Deloitte in Aberdeen, said: “For companies looking at investment on their global dollar, it could impact on how they view investment in the UK compared to other regions, such as West Africa.”
Bill Petrie, managing director of Wireline Engineering, based on the outskirts of Aberdeen, said: “The obvious worry would be that this additional cost may be pushed down the supply chain and could ultimately affect employees across the industry.”
Bob Ruddiman, a partner and head of energy with McGrigors, said: “This raid on the oil industry is a serious blow when it is working hard to exploit the remaining reserves in the UK.”
Simon Whiteside, tax director at PwC in Aberdeen, said: “Business has had no time to prepare for this and will need to quickly come to terms with the detail.”
Neil Poxon, managing director of ITF – the oil and gas industry technology facilitator – said: “The hike in supplementary charge tax will be a major concern for the oil and gas industry. It comes at a time when we are trying to encourage activity in the UK Continental Shelf in the face of competition from other lucrative oil regions.”
George Yule, chairman of Aberdeenshire-based Romar International, said: “Whereas imposed increases on operators generally find their way into the supply chain, I’m not sure this will be the case this time around in an industry that appears to be recovering at an accelerated rate from the global recession.”
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