Source Pravda.Ru

North Sea Oil Industry Raises Stakes With

The oil industry raised the stakes in the battle over Britain’s Gordon Brown's Budget yesterday, claiming that 50,000 jobs would be lost within five years unless plans to increase North Sea taxation were shelved.

The claim was later undermined by economists challenging the UK Offshore Operators Association figures and unions accusing them of “scaremongering”. Oil executives at BP, ExxonMobil and other association members tacitly admitted that there was little chance of changing Treasury minds after meetings this week with Mr Brown's senior adviser, Ed Balls, failed to win any sympathy.

The warning of the enormous fall in employment was based on new research by Aberdeen University which showed that by 2010 almost $12bn would be taken out of the industry through tax.

This is three billion dollars higher than previous in dependent estimates and would result in exploration and production expenditure falling by twenty percent over the next decade, the association argued.

“You cannot take billions out of an industry without impairing its ability to invest,” said Beverley Mentzer, an ExxonMobil executive and head of the assocation's fiscal policy group. “The result will be an accelerated decline of production and jobs, with Britain having to rely sooner on foreign imports of oil and gas.”

Economists at the Royal Bank of Scotland questioned the wisdom of UKOOA's spreading gloom and said they remained upbeat about the state of the oil industry. “We are concerned that negative publicity will impact on investment sentiment and do not see short term any negative impact from the Budget. Long term there are so many factors that will influence the sector it is not helpful to isolate one,” said Tony Wood, a senior economist at RBS.

Danny Carrigan, the Scottish regional secretary of Amicus-AEEU, said that the employers' claims were exaggerated. “It is too early to say what the consequences of the chancellor's tax changes will be ... The oil companies' claims are premature and smack of scaremongering.”

In his Budget, Mr Brown said that he intended to increase corporation tax on North Sea operators by a third. Although royalties paid by the industry are to be reduced and some capital allowances to be increased, no precise timetable has been given. The oil industry was shocked by the measures because it claimed to have been discussing lower rather than higher taxes with the Department of Trade and Industry.

James May, the association's president, said the trade and industry secretary, Patricia Hewitt, energy minister Brian Wilson and DTI officials had been kept in the dark over Mr Brown's plans. They had clearly been discomfited by the Treasury.

Treasury officials had justified the move by saying they “needed the money” and Mr May seemed to believe it unlikely the industry would win the day. “Gordon Brown is not someone who admits he has got something wrong or changes his mind ... but we will see.”

The Treasury insisted the Budget changes should not result in any fall in employment and should lead to an increase in overall investment in the North Sea.

“The changes have been carefully designed to create a stable, long term framework and have been structured so that companies that invest the most in the North Sea will pay the least additional tax because they will benefit from the new, generous, investment allowances.”

Recent opinion polls show that Mr Brown is popular with voters, but Ms Mentzer attributed his popularity to an “oversimplified analysis” of the Budget. “It's a normal human reaction [to be pleased] if you can get something for nothing.”

Budget yesterday, claiming that 50,000 jobs would be lost within five years unless plans to increase North Sea taxation were shelved.

The claim was later undermined by economists challenging the UK Offshore Operators Association figures and unions accusing them of “scaremongering”.

Oil executives at BP, ExxonMobil and other association members tacitly admitted that there was little chance of changing Treasury minds after meetings this week with Mr Brown's senior adviser, Ed Balls, failed to win any sympathy.

The warning of the enormous fall in employment was based on new research by Aberdeen University which showed that by 2010 almost $12bn would be taken out of the industry through tax.

This is three billion dollars higher than previous in dependent estimates and would result in exploration and production expenditure falling by twenty percent over the next decade, the association argued.

“You cannot take billions out of an industry without impairing its ability to invest,” said Beverley Mentzer, an ExxonMobil executive and head of the assocation's fiscal policy group. “The result will be an accelerated decline of production and jobs, with Britain having to rely sooner on foreign imports of oil and gas.”

Economists at the Royal Bank of Scotland questioned the wisdom of UKOOA's spreading gloom and said they remained upbeat about the state of the oil industry. “We are concerned that negative publicity will impact on investment sentiment and do not see short term any negative impact from the Budget. Long term there are so many factors that will influence the sector it is not helpful to isolate one,” said Tony Wood, a senior economist at RBS.

Danny Carrigan, the Scottish regional secretary of Amicus-AEEU, said that the employers' claims were exaggerated. “It is too early to say what the consequences of the chancellor's tax changes will be ... The oil companies' claims are premature and smack of scaremongering.”

In his Budget, Mr Brown said that he intended to increase corporation tax on North Sea operators by a third. Although royalties paid by the industry are to be reduced and some capital allowances to be increased, no precise timetable has been given. The oil industry was shocked by the measures because it claimed to have been discussing lower rather than higher taxes with the Department of Trade and Industry.

James May, the association's president, said the trade and industry secretary, Patricia Hewitt, energy minister Brian Wilson and DTI officials had been kept in the dark over Mr Brown's plans. They had clearly been discomfited by the Treasury.

Treasury officials had justified the move by saying they “needed the money” and Mr May seemed to believe it unlikely the industry would win the day. “Gordon Brown is not someone who admits he has got something wrong or changes his mind ... but we will see.”

The Treasury insisted the Budget changes should not result in any fall in employment and should lead to an increase in overall investment in the North Sea.

“The changes have been carefully designed to create a stable, long term framework and have been structured so that companies that invest the most in the North Sea will pay the least additional tax because they will benefit from the new, generous, investment allowances.”

Recent opinion polls show that Mr Brown is popular with voters, but Ms Mentzer attributed his popularity to an “oversimplified analysis” of the Budget. “It's a normal human reaction [to be pleased] if you can get something for nothing.”

Comments
Kim Jong-un's tactic of hard power teaches USA lesson of obedience
Putin in Egypt: Who's the big player in the Middle East?
Putin in Egypt: Who's the big player in the Middle East?
US military men depressed over of Russia's new T-5000 sniper rifle
Turkish President Erdogan issues ultimatum to Washington and Brussels
Turkish President Erdogan issues ultimatum to Washington and Brussels
US military men depressed over of Russia's new T-5000 sniper rifle
Turkish President Erdogan issues ultimatum to Washington and Brussels
Child model from Russia ranked most beautiful girl in the world
Russia works on MiG-41 doomsday fighter jet
US military men depressed over of Russia's new T-5000 sniper rifle
US military men depressed over of Russia's new T-5000 sniper rifle
Russia to rebuild its former Soviet naval base in Syria's Tartus
Lenin planted the seeds that destroyed the USSR
Kim Jong-un's tactic of hard power teaches USA lesson of obedience
The need for a Global Political Agenda 2018
Russia to rebuild its former Soviet naval base in Syria's Tartus
Russia works on MiG-41 doomsday fighter jet
Russia works on MiG-41 doomsday fighter jet
Russia works on MiG-41 doomsday fighter jet
Russia works on MiG-41 doomsday fighter jet