Oil leaders in ‘full and frank discussion’ with ministers
By David Perry and Ross Davidson
Published: 01/04/2011
Angry oil industry leaders confronted the UK Government yesterday with the damage they believe the £10billion tax raid on the North Sea will do to the offshore sector.
Ministers left the hour-long Westminster meeting looking shellshocked, after what was described as “a full and frank discussion”.
Industry body Oil and Gas UK’s chief executive, Malcolm Webb, insisted afterwards that 40,000 jobs were still at risk as companies continued to assess the impact of a 12 percentage point increase in their tax rate.
He said oil company representatives – believed to include ConocoPhilips’ UK and Africa president Paul Warwick and Total UK managing director Roland Fester – were promised a meeting with Chancellor George Osborne after his return from the G20 finance ministers meeting in China “to investigate whether negative impacts of the tax increase can be mitigated”.
Mr Webb said: “We did not make any threats at all but we told them we knew that various projects are now in jeopardy in the light of these changes.”
He revealed a survey to be completed by late April will detail the impact of the tax shock on firms’ investment plans. The industry will work with the government to try to mitigate some of the worst effects, possibly through additional tax reliefs and by raising the level of the price trigger – set by the chancellor at around $75 per barrel of oil – when the tax increase will start to be reduced.
An unprecedented team of four senior ministers attended yesterday’s meeting of the government-industry forum Pilot to take stock after Mr Osborne announced the tax grab would be used to fund a 1p reduction in fuel duty. They included Energy and Climate Change Secretary Chris Huhne, Scottish Secretary Michael Moore, Exchequer Secretary Justine Greening and Energy Minister Charles Hendry.
Mr Webb made it clear he was still “not happy” at developments, and said it was a misconception that massive profits were being made in the North Sea. He added: “It is not true there is some huge bonanza going on when you look at the whole picture.”
Mr Huhne said ministers had listened to the concerns and would consider some of the points made and “want to understand” the industry’s position more carefully.
Ms Greening said the cut in fuel duty “has to be fully funded, so we will progress with our plans”. Mr Moore said the government was “serious about consultation” but put warnings about cuts in investment and jobs down to companies “taking stock of the consequences of decisions taken last week”.
Meanwhile, Total chief executive Christophe de Margerie has written to Mr Osborne to warn him the French operator may review future North Sea projects.
Earlier this week the Press and Journal revealed Norwegian company Statoil had halted work on its £3billion-plus plans to bring the Mariner field into production because of the tax rise. The following day Valiant Petroleum said a near-£100million project in UK waters was no longer viable because of the surprise Budget move.