UK government makes first ever loss on North Sea oil

Aberdeen has been badly hit with Shell announcing job losses this week. Picture: Ian Rutherford
Aberdeen has been badly hit with Shell announcing job losses this week. Picture: Ian Rutherford
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The UK government has made a loss from oil and gas production for the first time in history.

The Treasury put £24 million more into investment and decommissioning than it got back in petroleum revenue tax in 2015-16, the first time the oil balance sheet has been in the red since records began in 1968-69.

The government said “it is doing everything it can to support the North Sea industry” following the “concerning” figures, compiled by HM Revenue and Customs.

The Treasury received £538m in corporation tax from production, comprising £259m in ring-fenced corporation tax and £279m from the supplementary charge – which was halved by the Chancellor in March and backdated to 1 January.

This was not enough to compensate for the £562m loss it incurred in petroleum revenue tax (PRT), leaving a negative balance of £24m. Scottish Secretary David Mundell said: “These oil and gas revenue figures are particularly concerning, showing a fall to their lowest level since the 1960s.

“That’s why the UK government is doing everything it can to support the North Sea industry to become innovative and competitive on a global scale.

“No other government has supported their industry so extensively.

“We have established the Oil and Gas Authority to drive greater collaboration and productivity within the industry, and in the last two Budgets we announced major packages of tax measures worth £2.3 billion to ensure the UK Continental Shelf remains an attractive destination for investment.

“We are working collaboratively with the Scottish Government and Aberdeen City and Aberdeenshire councils to support the area, but it is because of the broad shoulders of the wider UK economy that we are able to provide this support to our oil and gas industry, and to the thousands of workers and families it supports, at this very difficult time.

“Next week I will travel to Dallas and Houston, the biggest oil and gas producing cities in the US, to press the case for investing in Scotland, and to find paths for Scottish companies to export their expertise in the industry.

“We need to take action now to build a bridge to the future of the North Sea and help the UK’s oil and gas industry to export its world-class expertise around the globe.”

Earlier this week Shell announced plans to slash its UK workforce by a fifth, shedding 475 jobs in Aberdeen and the north-east.

The announcement led the Unite union to warn that at the current rate there would be no viable North Sea oil industry within a decade.

But there was a glimmer of hope for the sector yesterday as oil prices rose about $50 a barrel for the first time in nearly seven months.

Benchmark Brent crude rose one per cent to $50.22 at one stage, its highest level since early November.