In a new book soon to be published, he argues: \”UK oil and gas production has been steadily declining since 1999. The reason is that the UK government, unlike those of most other countries, has abandoned oil and gas production to the private sector and has failed to create attractive conditions for private companies to invest more.\”
Well, yes, but perhaps this isn\’t the solution:
He adds: \”The government should follow the example of Norway and many other countries by setting up a hydrocarbons authority, which would initiate new private-public partnerships to engage in offshore oil and gas production. This would generate many billions of pounds in highly needed revenues.\”
It could just be that, err, it\’s the last part of that first quoted para that\’s the important part.
The last time a windfall tax was imposed on North Sea operators in 2005, it brought short-term gains to the Treasury but led to a slump in drilling activity that ultimately cut tax revenues.
The way the government taxes oil companies is also coming under the spotlight. The tax rate is 50 to 75 per cent, depending on the age of the field. It is hard to compare this with tax regimes around the world. In Norway, the government levies a slightly higher tax rate of 78 per cent. But, crucially, it allows companies to offset the entire cost of exploration as tax relief, even if that exploration does not yield any oil. In the UK, companies can only claim tax relief against exploration if the newly explored field starts generating revenue.
Maybe the fuck up is in what government is already doing….meaning that having government doing more might not be the most entirely logical of solutions.
Perhaps if they just taxed less there would be more oil being pumped up?
Like, perhaps, the BP Peterhead project? The idea was to strip natural gas of the CO2, burn the hydrogen and use the CO2 to pump up the last oil from a field. All that BP wanted was that they pay lower per barrel fees on the oil they pumped up. If they didn\’t do the scheme then the oil wouldn\’t be pumped up at all. If they did then there would be extra revenue for the Treasury, albeit at that lower rate. So on nett the scheme would have been an addition to the Treasury.
Gordon Brown turned it down of course.
This is one of the problems we progressives have. Sure, of course government can make life better through the powers of government. But all too few who subscribe to this idea, who call themselves progressives, also subscribe to the obvious point that often this can be by government stopping using its powers to do some of the damn fool things it already does.
Like, for example, if you want to increase oil and gas production from the North Sea you might want to think about taxing it more lightly?