Following the recent (29 October 2018) announcement of the UK budget, Will Scargill, Senior Oil & Gas Analyst at GlobalData, a leading data and analytics company, offers his view on the impact on the oil and gas sector:
"The UK has one of the most attractive fiscal regimes for oil and gas production globally, offering the lowest discounted state take out of the top 50 producing countries. Therefore, the most important thing for the industry now is a stable investment climate conducive to long-term planning, particularly given the uncertainties already present through the Brexit process.
"Measures in the 2015 and 2016 budgets reduced the tax burden on the sector significantly. Headline tax rates were cut from 62% (or 81% for older fields) to 40% and a 62.5% investment allowance was introduced.
"Although oil price rises in recent months have buoyed cash flows in the sector, the maturity of the area mean that oil and gas are more costly to extract and finds are generally smaller. Many major international oil companies have divested their UK assets. In this context, an attractive fiscal regime with a stable investment climate is crucial for attracting the investment to achieve the government’s aims of maximising economic recovery."