Campaigners' claims spark new row over George Osborne's �2bn windfall tax on oil and gas companies
A fresh row has erupted over the chancellor's �2bn energy windfall tax after green campaigners accused oil and gas companies of "scaremongering" and making "bogus" claims in their bid to reverse the controversial increase.
Greenpeace and Platform, the oil and gas watchdog, said: "Threatening the loss of jobs and investment is the oldest trick in the political lobby book. Given that the UK tax regime is acknowledged as being one of the most favourable in the world for energy companies, claims by this vocal and influential lobby need to be rigorously examined by independent bodies, rather than be taken at face value."
A report by the two groups seeks to undermine arguments against the tax put forward by the industry, and flags up the huge profits made by companies on the back of soaring oil and gas prices. It draws on research published by analysts at the City group Edison Investment Research showing that, on average, share prices in oil and gas producers operating offshore rose by nearly 200% over the past year.
According to the report: "Britain's tax regime is relatively benign. The rate of tax on wells drilled since 1993 is 62%. Norway, which has the same geology as the UK, has a 78% tax rate on oil production profits. In a 2009 oil industry survey, the UK was voted the companies' favourite country to invest in, out of 152 countries (outside North America)."
Campaigners point to Canada, where there are moves to reduce tax incentives, and Venezuela, where the government raised the tax on oil revenues at prices above $100 a barrel from 60% to 95%.
A leaked letter from the UK oil industry seen by Greenpeace shows oil firms demanding the government introduce additional tax breaks to offset the effects of the windfall tax.
In the budget, the chancellor, George Osborne, increased the supplementary charge on oil and gas production from 20% to 32%. That takes the overall rate for older fields subject to petroleum revenue tax to 81%, up from 75%, and the rate for fields not subject to the tax to 62% from 59%.
The move allowed Osborne to cut fuel duties for hard-pressed motorists, who have been hit hard by sky-high petrol prices. Treasury insiders said rising oil prices have made producers 50% more profitable over the last two years.
The energy secretary, Chris Huhne, has defended the tax hit, saying there was independent backing from the energy consultancy Wood Mackenzie and others that the rise in North Sea taxes would only have a "marginal impact" on investment.
But Malcolm Webb, chief executive of the Oil & Gas UK lobby group, warned that �12bn of investment in the North Sea has been thrown into doubt and the creation of 15,000 jobs put at risk. He said unexpected tax changes damaged investor confidence and led to depressed investment, less development and lower production.
"Investment fell by a quarter between 2006 and 2008 following the last hit on the industry in 2005," he added.
"Of all the prospects being considered, 25 projects which [together] account for over a billion barrels of oil and gas are now unlikely to proceed and the lives of at least 20 producing fields will be shorted by up to five years."
But the industry has rarely been more profitable. In February, Shell revealed it was making �1.6m an hour, with full-year profits at $18.6bn, almost double the figure for 2009. Chief executive Peter Voser boasted: "There is more to come from Shell."
Source: http://www.guardian.co.uk/business/2011/may/27/greenpeace-platform-oil-gas-windfall-tax
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