UK Chancellor, Philip Hammond, has announced possible tax incentives for the oil and gas industry. A selection of industry commentators give their verdict.
Emma Perfect, CEO at Lux Assure, oil and gas chemical technology company, said:
“This announcement is welcome news for the North Sea oil and gas industry, which needs more support to keep providing the UK with vital energy resources. As new, smaller operators enter the basin, it will be important for technology companies to continue developing integrity innovations for these ageing assets to reduce costs and keep the region competitive.”
Chris Bates, Partner, Norton Rose Fulbright, commented:
“The oil and gas industry has been calling for its rabbit out of the hat moment for a significant amount of time and Hammond has, somewhat, delivered on these calls. While not a complete overhaul, it is hoped these measures will alleviate the current bottleneck around the transfer to of mature fields in the North Sea to late life specialists.
“Government wants to keep North Sea oil fields as productive as possible for the longest time possible and the way to do this has seen to be to engage late life specialists with the ability to invest in the technology to extract the last economic drop and manage the decommissioning process as economically . However, until now, the tax system has acted as a brake to the activity. Generous tax relief for decommissioning costs reduces the effective post tax cost to established operators but the economic value of the relief is heavily reduced for new entrants. Announcements in the budget suggest government is ready to take on this challenge but finding a solution acceptable across the whole industry and within government will take time.”
Scott Lehmann, VP of Product Management & Marketing, Petrotechnics, has said:
"Aggressive tax incentives that make it easier for operators to sell fields and ultimately allow for smart decommissioning will be key for the government to play its part in the future of the North Sea. But operators in this mature basin understand that they need to do more to remain competitive.
"The roll-out of new technologies, including the dawn of Industry 4.0, enhanced digitalisation and analytics that drive operational excellence will ensure a promising future for the North Sea – and big opportunities for operators, the entirety of the supply chain and investors alike."
Sean Buchan, Managing Partner – EMEA, Ducatus Partners, said:
The North Sea oil and gas sector has faced stark challenges during the downturn due to high operating costs and the maturity of the basin. The tax incentive measures announced today, particularly around decommissioning, should help increase M&A activity with new ambitious owners of key assets emerging. As a result, operators and service providers will require a novel approach to sourcing the right leadership talent with the capabilities and experience to drive the kind of organisational and behavioural change needed to succeed in this climate.
"But what’s more, the industry will also require an increase in the adoption of innovative technologies in addition to bold leadership to make a sustained impact on the bottom line.”
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/09032017/industry-response-to-uk-budget/