UK Regulator Raises the Levy

The UK upstream regulator Oil & Gas Authority is raising the levy on producers this year to cover its rising workload, it said February 19. 

With effect from April 1, it will go up 12% from £26.4 ($34.4)mn in 2019/20 to £29.6mn in 2020/21. "This is to support delivery of the UK net zero target and a new digital energy platform. Offshore licensees will be notified of the exact levy due for their licences in mid-April, after the amount due is calculated," it said.

OGA chairman Tim Eggar told an industry conference last month that flaring and venting of gas would come under much closer scrutiny, although this would conflict with the OGA's core objective of maximising the economic recovery of the UK continental shelf.

The agency told NGW late January that it was "reviewing and updating our MER UK Strategy in order to ensure that the UK's net zero ambitions are fully embedded and at the same time reflect stewardship and other changes in the basin's operating environment. We are also looking much more closely at flaring and venting, using performance benchmarking which we know has helped drive positive changes. The results of these reviews will be available later this year."

There is a two-tier levy mechanism with the annual levy apportioned between pre-production (11%) and in-production (89%) licence holders, based on an assessment of the costs that the OGA occurs in relation to each group. This apportionment is regularly reviewed to ensure it remains appropriate.

Exploration licence holders and licence holders with no approved field development plan are subject to a lower ‘non-producing’ levy rate. Additionally, the OGA is allowing a ninety or eighty per cent discount on some ‘Promote’ licences and ‘Innovate’ licences in Phase A or B of their initial term, if held by companies which qualify as micro-businesses.