Oil and Gas UK, the trade association of UK offshore oil and gas industry, has suggested in a report that the recent changes in the country’s tax policies have attracted many companies to the oil and gas industry and recorded the highest investment in the last three decades.
The trade association in its 2013 Activity Survey report, said that the investment has generated thousands of jobs across the country, while revenues from the oil and gas production and resulting tax revenues will raise.
Oil and Gas UK’s survey also indicated that the investments ranged from less than £50m to over £1bn, taking the total investment to £11.4bn in 2012, which is predicted to rise over £13bn in 2013.
Encouraged by the tax break, oil and gas companies are now planning to invest totalling nearly £100bn.
The Department of Energy and Climate Change (DECC) has received projects and approved development projects twice the number between 2011 and 2012.
Since January 2012, the DECC has approved a total of 33 projects, which involves an investment of £13.4bn.
Oil & Gas UK chief executive Malcolm Webb said after the two years of uncertainty regarding tax and low investment, the country isnow experiencing new investments to develop new oil and gas fields in the UK continental shelf (UKCS) and also improve the existing assets and infrastructure.
"The recent introduction of targeted tax allowances to promote the development of a range of difficult projects, coupled with the Government’s ground-breaking commitment to provide certainty on decommissioning tax relief, has prompted global companies and independent businesses alike to take another look at the UK as an investment destination and resulted in a new wave of investment," Webb added.
The new and improved tax regime has made more oil and gas reserves commercially viable for development, but the survey also indicated that new discoveries were not made.
According to the report, in 2012 production dropped to 1.55 million boe per day, down by 14% from 2011 and by 30% from 2010, which is mainly driven by frequent adverse tax changes in the mid-2000s.
The report added that production, which may drop slightly in 2013 to 1.45 – 1.5 million boe per day, will again rise to about two million boe per day by 2017.