Responding to calls for a windfall tax to be levied on energy companies, Malcolm Webb, chief executive of Oil & Gas UK, the representative body for the UK oil and gas production sector, said:
“The Government stands to reap a bumper tax harvest from UK oil and gas production this year, thanks to the higher oil and gas prices and the unparalleled rate of tax already paid by this sector. It is for them to choose how they spend these funds.
“UK oil and gas producers currently pay tax on their profits at a rate ranging from 50% to 75%. This means that the Treasury will earn £16 billion in tax this year from UK oil and gas production, compared to £8 billion last year. This “windfall” of £8 billion is more than sufficient to cover the Compass agenda of social and environmental causes.
“John Healey MP made a commitment for fiscal stability when he was a Treasury Minister, giving an undertaking on behalf of the Government not to raise the taxes further on UK oil and gas producers during the lifetime of this Parliament.
“For the Government to go back on that pledge now to an industry which in the recent past has suffered four adverse tax hits would take us into dangerous territory as far as fiscal instability and investor confidence is concerned. Such a move would be folly, given the hundred of billions of pounds still needed to be invested in the UK to recover our remaining oil and gas reserves and sustain UK energy security.
“The Prime Minister and the Chancellor evidenced a strong understanding of the need for increased and sustained investment in UK oil and gas when they met with us in Aberdeenshire in May. I feel sure these points are not lost on them and that they have no intention of going back on the Government’s word on this.”
Notes to editors
Tax paid by the UK oil and gas industry in 2007/ 08: £7.8 billion
Estimated tax to be paid in 2008/ 09: £15 billion
Total tax paid since 1968: £248 billion
Capital investment in 2006: £5.7 billion
Capital investment in 2007: £4.9 billion
Since 1970, total expenditure by the industry (including capital investment, exploration and operation spent) has been £394 billion.
Capital efficiency has decreased rapidly, with close to five times the amount of capital investment now needed to produce each barrel of oil or gas.
The UK produced 2.8 million barrels of oil equivalent per day (boepd) in 2007 and is expected to produce 2.6-2.7 million boepd in 2008.
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