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Lloyds List: Oil chiefs plead with government for tax help

Martyn Wingrove, Lloyds List
Published: Sep 05, 2007

BRITAIN’s oil industry has begged the government to improve fiscal terms to maximise recovery of the country’s energy resources, particularly gas reserves West of Shetland.

Speaking at the Offshore Europe event in Aberdeen yesterday, executives from BG Group, Shell and ExxonMobil called for better tax terms for developing the UK’s gas fields.

BG Group’s chief executive, Frank Chapman, said the British government needed to make changes to allow smaller gas fields to be developed.

‘Operators need fiscal certainty from governments and cost certainty from contractors. Projects need to be viewed across the full economic lifecycle,’ Mr Chapman told delegates.

He then outlined three areas where the fiscal regime could be improved. ‘Gas production is falling so imports are rise. We need to sustain indigenous production, but tax can blunt gas opportunities.

‘The government needs to support exploration of high risk prospects, such as high pressure-high temperature, plus there are numerous discoveries in the North Sea that can’t get off the blocks because of concerns over the fiscal regime.’

Rob Olsen, chairman of ExxonMobil’s international operations, told the conference: ‘Investors need clear understanding of what the future will be. The North Sea is a high cost province, but it benefits from infrastructure. Recovery of all the UK reserves is a combination of utilising infrastructure, developing technology and the fiscal regime. We are optimistic that there’s still quite a bit of activity and value in this region.’

ExxonMobil is part of a consortium of companies examining ways of developing gas resources in the remote West of Shetlands area, where Total has just discovered another field with its Tormore well.

Shell head of exploration and production, Malcolm Brinded, said the industry has extended the life of fields far beyond their original time frame. ‘Technology does work. It helps us extend the life of fields and increase recovery of reserves, such as on our Brent field. Some of the developments depend on prolonging life of existing infrastructure. So this year we started the GBP350m rejuvenation of onshore gas facilities in Scotland to extend their life beyond 2020.’

David Cairn, the government’s Parliamentary Undersecretary of State for Energy, said: ‘The government believes the industry has a vibrant future inScotland.

‘The North Sea will be profitable for decades and we want to build on the industry’s focus on exploration targets.’

He also said the government will not allow Scotland to take control of the offshore industry, despite calls from the Scottish parliament.

‘The UK government has no intention to devolve the energy power and offshore industry because this industry thrives on certainty and stability.’

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