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Oil Contractors Vent Need for Tax Cuts to Stay Afloat

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Oil & Gas IQ
10/19/2009

Industry leaders in the oil and gas industry are now appealing to the British government’s top decision-makers for tax breaks amid fears that they could be at risk of a revenue squeeze to pay off the nation’s debt.

Campaigners have already posed their argument to Lord Mandelson, with experts insisting that contractors and limited companies should be protected rather than punished during this trying period. As Business Secretary, Mandelson will be in a position to back up his promise for policy change to aid struggling industries, such as engineering, before the General Election.

John Gallagher, head of North Sea exploration at Shell, spoke at an event in Aberdeen about his concerns that the Pre-Budget report to be released later this autumn will include a rise in taxation for oil producers.

"It needs a lot of nurturing," Gallagher warned an audience of delegates, "There’s an under-recognition of the maturity of the North Sea. We need to foster these assets into the middle age, perhaps more holistically than we are doing at the moment."

He added: "There are lots of brown field operations getting taxed as if we are in the first 10 years of basin life."

Gallagher was supported in his movement for incentives by Malcolm Webb, CEO of Oil and Gas UK, in a meeting with the Minister of State for Energy. They proposed that billions of barrels of oil and numerous small developments would be lost if the solid production infrastructure previously installed to develop large fields is no longer upheld.

Despite the previous Budget’s introduction of a value allowance, devised to boost investment in costly developments such as small fields and HPHT wells, the industry chiefs do not believe it is high enough to stimulate a credible change.

News of the outcry comes on the back of reports that investment in North Sea oil and gas is subject to an encouraging upturn as banks return to lending. At the same time, positivity has been expressed by Scottish Secretary of State Jim Murphy over the working partnership between oil producers and their renewable energy industry, suggesting that prosperity should continue.


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