The industry association representing North Sea oil and gas producers has called for a 20 percentage point cut in taxes to secure the ongoing future of the ageing province.

 

Oil & Gas UK said March 8 that without action, the current low price business environment could see more than one billion barrels of oil and gas no longer considered economically viable to extract.

 

The industry pays 50% tax on production profits on most fields. Some older fields, which received development consent before March 1993, also pay Petroleum Revenue Tax, which takes their rate up to 67.5%. Oil & Gas UK wants PRT to be removed and for a permanent cut of 20 percentage points to the main tax rate, which would take it down to 30%.

 

There have already been recent cuts to tax rates. In the March 2015 Budget the UK government reduced the rate for fields paying PRT from 75% to 67.5%, and removed a 10% supplementary charge on all fields.

 

Oil and gas producers have faced a huge slide in prices over the last couple of years, with oil dropping from $100 to $30/barrel, while operators are working hard to tackle cost pressures in what the lobby group has previously called a "supermature" basin.

 

Oil & Gas UK's economics director Mike Tholen said: "To bridge the gap between the 6.3bn barrels of oil and gas on the UK Continental Shelf in which investment is already approved and the 20bn that we estimate are out there, we must fight fiercely to attract global capital."

 

He continued: "That requires us to be attractive in cost, technology and fiscal terms, and this year’s Budget presents the perfect opportunity for the government to signal to investors its long-term ambition for the sector."

 

The UK Treasury is due to unveil its new budget March 16.

 

A recent study by Oil & Gas UK found that approvals for new investment offshore the UK are likely to fall to less than £1bn this year, from a typical £8bn/year over the last five years.

 

In addition to tax cuts, the lobby group also suggests measures could be taken around decommissioning liabilities, investment allowances and loan guarantees.