Coming UK licence round surrounded by fiscal uncertainties

Apr 20, 1998 02:00 AM

Oilfield operators have warned the government a forthcoming British offshore exploration licensing round may not be as "beneficial" as hoped because of fiscal uncertainties caused by a tax review.
UK Offshore Operators Association (UKOOA), the offshore oil industry's trade body, has written to Energy minister John Battle outlining that an imminent decision to open the l8th licensing round "wouldn't provide the right, beneficial results to the government" in the current climate of fiscal uncertainty.
The licensing round, already delayed from late last year by legal challenges from environmentalists, is expected to be opened for tenders soon. "Companies would be unable to evaluate the true economic merits in view of the current fiscal review," a UKOOA spokesperson said.
Britain said in March it was likely to impose extra taxes on North Sea oil and gas production and is due to issue a consultation paper detailing two alternative packages of tax reform.
A DTI spokesman said the licensing round was due to commence "quite soon," but no date has yet been set. He added that Battle had not yet replied to UKOOA's letter. "The issue the UKOOA has been talking about has been around for some time. I don't see that it is sufficient cause for a delay," the spokesman said.
The government has proposed either extra corporation tax on oil and gas fields or the imposition of Petroleum Revenue Tax on all fields approved after March 1993.
A final decision should be made law in next year's Finance Bill.
Consultants Wood Mackenzie warned in a report this month that the proposed tax changes could reduce the worth of assets held by companies by up to 3 billion pounds. British Petroleum, Shell and Exxon would be amongst the companies most hit by the changes.

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