RE: £843,85512 Apr 2023 13:16
Ocelot,
"In the case of the Levy, the obvious thing to do is to invest in the UK."
You can only offset expenditure against the EPL if you have qualifying expenditure - which the majority of Operators don't have.
Besides, it's only 29% tax relief for exploration, not the 91.2% usually quoted.
So since the imposition of the EPL, as a result;
90% of UKCS Operators are reducing expenditure.
Total have announced a 25% reduction in UKCS expenditure.
Shell have put 10% of their UKCS portfolio up for sale.
Harbour Energy have announced large job cuts in ABZ.
BP & Enquest have stated that they will divert investment from the UKCS to the SEA area.
Equinor have put the FID for Rosebank on hold.
So the EPL is a kick in the nuts for the UKCS, which was just beginning to get back on it's feet after the 2015 - 2020 oil price crash (when the UKCS lost c. 200,000 jobs out of a workforce of 450,000) and the effects of the pandemic.
Bear that in mind when you hear people wanting the oil price to 'return to normal' - the oil price was artificially low during the 2015 - 2020 period, and fell even further during the pandemic.
The crippling effect of the EPL was obvious to all in the oil industry, who have seen it before when the first 'windfall profits tax' was enacted by the Tories in the early 1980's.
Even when a windfall profits tax was enacted on other industries (as in Gordon Browns ruinous budget of 1997), the effect was still the same.
Plummeting investment, job losses, fleeing of capital Overseas - all of which took a decade to recover from - and ultimately less revenue to the Treasury.
Look at the UKCS oil production from the 1980's & 1990's to get an idea of the effect.
Production initially kept rising until the mid-1980's as some of the large fields already in development came onstream, but then oil production fell by around 40% and didn't recover for another 10 years.
And that was when the UKCS was in a much better position than it is now.
We are now in the tertiary phase, where significant investment is needed to maintain current levels of production and all the large & medium sized fields have been developed.
That investment is going - and this time it's not going to come back. The UKCS was a high cost, low reward operating environment before - now it's much worse and the fiscal certainty that these sorts of projects need is gone.
The long term effect on our energy security, jobs and balance of payments will be huge.
And yet the Opposition parties say that we are not being taxed enough!
Remember, we pay:
30% Corporation tax (not 25%!)
10% Supplementary Charge (only the Banks pay SC - and they only pay about 4%)
35% EPL
Also remember that all the above a 'ring fenced', so cannot be offset against expenditure or losses elsewhere in the organisation.
It meant that during 2015 - 2020, while we were absolutely on our knees haemorrhaging jobs and cash, we were still paying 40% tax when everyone el
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