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North Sea oil spared tax leap

THE OIL industry is becoming increasingly confident that it will escape a heavy increase in its North Sea tax burden. The optimism was underlined yesterday when British Petroleum suggested no new government licences would be handed out until the results of a fiscal review were known.

John Battle, the energy minister, rejected pleas from the UK Offshore Operators Association that the 18th round of licences be shelved because of low oil prices and uncertainty over the tax regime.

But BP said it had been given assurances by Department of Trade and Industry officials that the shape of any fiscal changes would be known before bids for new acreage were concluded.

Tony Hayward, head of exploration and development at BP, said it was "the right result to accommodate both [industry and government] parties."

Mr Hayward's remarks, made at his company's first quarter results briefing, suggest the Government is going to tread carefully on a tax review that is already behind schedule.

But UKOOA officials said they were unaware of any commitment by the DTI to complete the tax review before licensing was complete. "I am not sure the timing would fit anyway," said James May, director general.

The tax review is already late. Gordon Brown, the Chancellor, said in his March budget the Government would give details of its proposed tax changes by the end of April. That would be followed by a lengthy consultation period.

DTI officials said an announcement on the licensing round, which is also behind schedule, would be made shortly, with applicants having until the middle of September to put in bids. The DTI said there was no attempt to co-ordinate the timing with the Inland Revenue's review of taxes.

Investment Column, page 24