A new tax on North Sea oil profits is expected to benefit the Canadian companies with operations there, analysts said yesterday. Britain placed a new ten percent tax on yesterday in a move that angered British oil producers. However, Gordon Brown, Britain's Chancellor of the Exchequer, also said in his annual budget address that Britain would raise first year capital allowances to 100% from 25% and set a date for doing away with royalties to encourage new investment. The changes are expected to benefit Canadian companies with growing North Sea operations, said Brian Prokop, industry analyst at Peters & Co. in Calgary. Those companies include Talisman Energy Inc., one of the region's biggest operators with output of 110,000 barrels of oil a day, EnCana Corp., which is developing the Buzzard discovery, and Canadian Natural Resources Ltd., Canadian producers will get bigger writeoffs and enjoy a buffer in periods of low oil prices when profits are low, Mr. Prokop said. “It's a very positive development, he said, as long as Britain follows through with abolishing royalties. Indeed, Barry Nelson, a spokesman for Talisman, said the move is "quite positive" for his company because the increase in the tax rate is more than offset by the decrease in first-year taxable income. "And the good news is that in the longer term, as we now anticipate it, the royalty abolition should generate a net improvement and we think it will encourage new investment in the North Sea," Mr. Nelson said. Mr. Brown said in the House of Commons the balanced changes would help create "a stable long-term framework" for the key oil sector and pave the way for the next stage of development of North Sea resources. Analysts said the changes are clearly designed to boost a mature basin. The discovery of the Buzzard field by PanCanadian, which merged with Alberta Energy Co. to form EnCana this month, was Britain's biggest new oil find in almost a decade. Expected to start producing in 2005, it is not enough to stop a decline in output from the North Sea that began in 2000 and accelerated last year. However, the changes angered British companies. "This could undermine investor confidence in the long-term viability of the North Sea," said Trisha O'Reilly, a spokeswoman for UKOOA, a group which represents 30 companies active in the region. Royal Dutch/Shell Group said Mr. Brown's proposed relief would not "come close" to offsetting the impact of the rise in tax charges. Mr. Prokop said the move is indeed negative for companies that are squeezing as much as they can from existing assets and not developing new ones. The changes are also expected to benefit companies in periods of low oil prices. "Royalties are a top line charge, profit are bottom line," said Duncan Mathieson, analyst at Scotia Capital Inc. "If the price of oil goes to $10, there is still a royalty, even through there may not be a profit, so it helps if you get into a weak price environment and profitability falls off the table." Greg Stringham, vice-president at the Canadian Association of Petroleum Producers, said it was unclear how the move would affect the competitivenes of Canada's fiscal regime. He said sectors of the Canadian energy industry like the oil sands and heavy oil operations are already enjoying breaks similar to those introduced by Britain aimed at encouraging development.
An unidentified man wielding a knife attacked civilians in the Church of Notre Dame in the French city of Nice. Three people were killed, several others were hospitalised with injuries.One of the victims was beheaded