Falling oil prices have dominated the headlines over the past six months. Whilst consumers might be celebrating at the pump when filling up their cars, the impact within the industry, and implicitly across the wider economy, has been vast – companies are cutting projects and, sadly, individuals are losing jobs.
In its Budget announcement today, the UK government is expected to play its part to stimulate growth within the sector.
In the UK, oil and gas companies are required to pay two main taxes: a corporation tax and a supplementary tax specific to the sector. Whilst the rates vary depending on the age of the ‘field’, there are still some operations paying in excess of 80 percent of profits to the State.
Collectively the industry has been hoping for a substantial drop in duties – and got at least some of that hope fulfilled with news in the Budget announcement that the supplementary charge on North Sea oil producers is to be cut from 30 percent to 20 percent, while petroleum revenue tax will fall from 50 percent to 30 percent.
While such policy changes will of course be welcomed, the question has to be asked:
Should the industry be relying on government intervention, or looking internally for solutions?
Mike Tholen, economics director at industry body Oil and Gas UK advocates that whilst a tax cut will help the industry, costs need to be kept under control. Never has the need for diligent operations and effective management been more acute.
Last week, I blogged about how preparing for the future with higher operational efficiencies can force companies to think innovatively and sweat their assets in the most effective way. We’ve been working with companies throughout the oil and gas ecosystem to map out key processes and align resources effectively.
Learn more about how we work with our partners in this sector.