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UK Budget 2016: a competitive tax regime for an ultra mature basin

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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.

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    UK Budget 2016: a competitive tax regime for an ultra mature basin

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    UK Budget 2016.xls

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Table of contents

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Tables and charts

This report includes 9 images and tables including:

Images

  • 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
  • Project impact
  • Company impact

Tables

  • Retained decommissioning liabilities

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