The UK oil industry will return to being a positive taxpayer in the coming years, according to evidence presented to the House of Commons Scottish Affairs Committee.
Last year, the Treasury paid out £24m more in decommissioning and investment costs than it received back in revenue taxes, representing the first such deficit since records began in the 1968–1969 tax year.
Representing Oil and Gas UK, Mike Tholen said this represented the turmoil the industry is experiencing. The 2015–2016 year saw oil prices drop substantially below $50/barrel and even dropping briefly below $30/barrel. This inevitably resulted in UK oil producers spending more than they were earning.
In response, the industry attempted to become more efficient by reducing operating costs, sometimes involving staff cuts. Combined with the recent return to stable oil prices above $50 per barrel, Tholen said the industry “was spending less and earning more”,
resulting in it just about balancing its tax receipts for this fiscal year.
North Sea operators such as Shell, which also manufactures industrial lubricants like Shell Omala S2 G 320, have been endeavouring to ensure the long-term sustainability of the UK oil industry, according to Tholen. While he did state there is still oil and gas available, and there are the people and technologies needed to extract it, he relayed that the UK is a relatively expensive place to do business due to geography and the nature of offshore operation. He stressed the need to remain competitive with oil prices in the $50–60 range.