Britain's Offshore Operators Association, UKOOA, has responded to calls for new taxes to be imposed on UKCS activity following the prolonged rise in oil prices. It points out that investor confidence has only recently returned to the sector, following the government's surprise introduction of a 40% corporation tax rate for UK oil and gas producers in 2002. Although there has been a positive upturn over the past 12 months, UKOOA claims the sector remains vulnerable, and can only be sustained by continued investment from oil companies, a stable and predictable fiscal regime, and constructive dialogue with government.
Its new report, "Succeeding in a Challenging Environment," sets out the evidence of the recent revival.
Points listed include:
• 30% increase forecast for exploration and appraisal drilling this year (58 wells compared with 45 in 2003)
• Rising rig use, with semisubmersibles commanding their highest rates for over two years, with some rigs which had left the UK now returning
• Development approvals this year expected to double from last year's tally of 14
• 123 companies now active on the UK shelf (a record)
• Small and mid-size producers growing their share of total UKCS production.
Mike Tholen, economics and commercial director UKOOA, said at a conference in Aberdeen Nov. 17: "Higher oil prices are already facilitating `quick-win' incremental investments that would have been deemed too risky at a lower price, and there are signs that companies are also assuming higher prices when evaluating longer-term projects. But it needs to be remembered that investment is not driven by short-term oil prices, as new developments take two to five years to bring onstream and will be in production for a further 10 to 25 years. Any type of volatility or uncertainty hinders investment planning and needs to be avoided wherever possible."