Page 5 - EurOil Week 10 2023

EurOil COMMENTARY EurOil

OEUK CEO David
Whitehouse.

tax is paused when oil and gas prices fall below allowance is an opportunity to reduce some of
certain points. As the industry is cyclical, com- the risk associated with expenditure to decar-
panies could suffer a significant fall in profits if bonise UKCS activity.”
an event like the coronavirus pandemic causes “We welcome His Majesty’s Treasury
markets to slump, and would be left still having (HMT)’s commitment to super-charge
to pay the windfall tax. expenditure in decarbonisation,” he contin-
“Governments giving this certainty in leg- ued. “Certainty that this relief will support the
islation would materially improve the eco- full spread of the spend needed will be critical,
nomics of projects and ensure investors could including recognition of the range of business
make informed decisions when modelling models likely to be implemented to decarbon-
investment opportunities,” Whitehouse said. ise oil and gas. We look forward to continuing
“Secondly, this would allow commercial banks to work with HMT and HMRC as they legislate
to take a more favourable position on reserve- this and have included our paper submitted
based lending facilities which are an essential December 2022 for completeness.”
lifeline to financing North Sea production.
Finally, companies investing on an interna- Fiscal stability
tional level could make clear to their group that Last but certainly not least, OEUK wants to
a 75% tax rate would not be applied to their see “a long term competitive fiscal and regula-
profits when low prices are realised in the EPL tory regime that maximises local opportuni-
window, therefore improving UK capital allo- ties and de-risks UK investment.” That means
cation chances.” assurances that whatever government wins
the next election, likely to take place next
Supporting decarbonisation year, will not alter tax conditions that affect
OEUK also calls for an as “simple and effi- investments made under previous policies.
cient” as possible way of incentivising oil and “We need a fiscal and regulatory regime
gas operators to invest in decarbonisation. that supports lowering investment risk in the
The windfall levy already provides a subsidy UK with an objective to maximise investment
for decarbonisation of oil and gas facilities us- in energy security and accelerate the transi-
ing electrification. tion,” Whitehouse said. “The review should
The treasury should “legislate for an effec- focus on mechanisms that can deliver this
tive decarbonisation investment allowance such as dynamic capital allowances, appro-
that adopts a hybrid approach and avoids priate taxation of profits and commitment to
retrospective approval to ensure the measure driving investment in the total offshore energy
is applied in as simple and efficient a way as amongst others. The sector takes investment
possible,” Whitehouse said. “Decarbonisation decisions that span decades, and we need leg-
expenditure is an essential element of deliver- islation to consider this timeframe also.”
ing the UK’s net-zero ambitions and the North The spring budget is due to be released on
Sea Transition Deal emission targets. The March 15. ™

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