Higher oil taxes have prompted small oil producers to reconsider their investment plans in the UK North Sea, analysts and industry officials said yesterday. The impact on production may be evident in a year or two.
Irish exploration company Tullow is among the companies operating in the area.
In his pre-budget report on Monday, British finance minister Gordon Brown said he would raise the tax rate on oil and gas production to 50 per cent from 40 per cent, and tighten tax regulations.
The treasury will pocket nearly £2.1 billion (€3.01 billion) more each year from the oil sector, which has reaped record profits from high oil prices.
"The continual tinkering by the government and the volatility it creates is the biggest deterrent to future investment," said Ken McKellar, North Sea oil expert for Deloitte and Touche.
"This could be the straw that breaks the camel's back for some producers."
Small oil and gas producers, such as Venture Production Plc, Premier Oil and Tullow Oil, would be affected most by the hike, analysts said. Shares of many of these companies dropped after the announcement.
"Our member companies are reviewing their investment plans," said Trisha O'Reilly, spokeswoman for the UK Offshore Operators Association.
"There will be some marginal development projects that won't make the corporate investment hurdle."
For each £1 billion reduction in investment, at least 250 million barrels of production is lost, the industry group said.
Premier Oil, which spends about $30 million (€25.5 million) in exploration and development in the North Sea annually, said it planned to reduce its investment in the basin next year and to focus more on fields in Norway, Indonesia and West Africa.
Reuters
