Insight
UK Budget 2016: a competitive tax regime for an ultra mature basin
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*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
Report summary
The UK upstream oil and gas industry is going through a major cost reduction phase in response to continued low oil prices. However many operators are still in cash-flow negative position. Chancellor George Osborne announced three fiscal measures to support the United Kingdom Continental Shelf (UKCS). A reduction in the rate of Petroleum Revenue Tax (PRT) from 35% to 0%, a reduction in Supplementary Charge Tax (SCT) from 20% to 10% and an extension of the Investment and Cluster Area Allowances to include tariff income. We calculate a transfer of value (NPV10 at 1 Jan 2016) of the UKCS from the government to the companies, by around £3 billion, taking the company value from £26 billion to £29 billion.
Table of contents
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Executive summary
- Background
- SCT reduction
- PRT zero rated
- Investment/Cluster/Onshore allowances
- Implications
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Model field analysis
- Company and project value impact
- How does Budget 2016 impact exploration?
- Retained decommissioning liabilities – Budget brings tax relief certainty
Tables and charts
This report includes the following images and tables:
- Value transfer for the UK
- Marginal tax rate
- Government share with varying oil price
- IRR with varying oil price
- Government share and IRR at US$60/bbl: varying project cost base
- International fiscal comparison
- Retained decommissioning liabilities
- Project impact
- Company impact
What's included
This report contains:
