NORTH SEA oil firms were left aghast by the chancellor’s surprise tax hike on offshore fuel explorations yesterday, which has been imposed immediately to fund the fuel duty cut.
North Sea-focused oil explorers saw their shares hammered by the news yesterday that an existing levy on profits from UK production will rise from 20 to 32 per cent from today.
George Osborne said the duty is to compensate for soaring oil costs, and that it would be scaled back if oil prices dip below $75 a barrel.
While the Treasury will now consult with oil companies, industry bodies reacted furiously to the levy.
“Oil companies make long-term investment decisions on a stable and predictable tax regime. This is not helpful,” Steve Jenkins, chief executive of Nautical and head of the Oil and Gas Independents’ Association, told City A.M. “It goes against the idea of growth, jobs and exports.”
Analysts at Numis Securities said the unexpected tax jump could cut Aim-listed Xcite’s net asset value by as much as 40 per cent to 370p.
Premier Oil, which has nearly two-thirds of its assets away from the North Sea, could see net asset values drop by 2.5 per cent, Numis said.
“This one size fits all approach to increasing the tax rates will affect some fields more than others,” Alan McCrae, head of energy tax at PwC, told City A.M. “Unfortunately there might be a number of projects where companies decide that the risks of making further investments aren’t worth it any more.”