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Offshore U.K. operators continue to digest major changes to the Petroleum Revenue Tax (PRT) disclosed in Chancellor of the Exchequer Norman Lamont's budget earlier this month (OGJ, Mar. 22, p. 31).
The emerging consensus is that the changes will boost prospects for current development projects and maintaining production from aging fields but damage the outlook for exploration.
Lamont slashed PRT on current producing fields to 50% from 75% effective July 1 and abolished PRT on fields approved for development after Mar. 16. After Mar. 16, however, allowances for exploration costs no longer can be reclaimed against profits of producing fields.
U.K. Offshore Operators Association (Ukooa) said the new budget incorporated fundamental changes to a fiscal regime to which the industry had adjusted and were proposed without consultation.
"They are put forward at a time when industry uncertainty about the result of the current energy policy debate is starting to affect confidence in future investment offshore and halfway through a licensing round when industry applications have already been made," Ukooa said.
Retroactive tax burdens are unfair, the association said, and need to be mitigated by extending the relief available to committed wells.
"The implied switch to a high cost, high reward exploration regime will only benefit the industry if future budgets allow the industry to retain the results of successful exploration."
Effects on major
David Simon, chief executive officer of British Petroleum plc, said the reduction in PRT was a "long sought and fundamental structural reform, which ensures the tax treatment of U.K. oil production is on a more equitable footing, compared with the rest of British industry."
Besides improving profitability of taxable fields, North Sea operators would retain a greater share of benefits achieved through cost …