Oil industry warns of 40,000 job losses

Click to follow
The Independent Online
The big oil corporations have put 34 large North Sea exploration projects on hold because of the uncertainty over the Government's review of the offshore tax regime, the industry has warned ministers. Chris Godsmark, Business Correspondent, reports on new claims up to 40,000 jobs could go if Labour hits the oil giants with a second windfall tax.

The latest evidence submitted to the Treasury will increase the pressure on Gordon Brown, the Chancellor, not to use North Sea oil producers such as British Petroleum and Shell as a cash cow to raise billions of pounds of extra tax revenues.

The figures compiled by the Offshore Operators Association (UKOOA) show that 34 of the 143 investment projects planned by the big oil groups have been deferred until the outcome of the tax review. According to the companies' estimates, up to 105 projects could be abandoned because a rise in taxes would make them uneconomic.

The projects listed, though commercially confidential, are worth at least pounds 100m. UKOOA's submission shows that pounds 10bn of investment could be lost over five years, leading to 30,000 to 40,000 job losses. The industry employs 30,000 offshore workers, with up to 400,000 direct and indirect jobs based onshore.

The Chancellor launched the review in last July's Budget, telling MPs it would "ensure that an appropriate share of North Sea profits" were taxed, without damaging investment.

Profits from the big oil groups soared last year as the price of Brent Crude rose to as much as $25 a barrel. Though oil prices have fallen in recent months, the industry fears the government could raise pounds 5bn in a one-off levy similar to the windfall tax on the privatised utilities.

Treasury officials are expected to give ministers a list of policy options before Christmas, though the outcome will not be revealed until the March Budget.

The current regime, dating from 1993, cut petroleum revenue tax (PRT) from 75 per cent to 50 per cent, but abolished tax breaks on exploration projects. The industry paid pounds 1.7bn in PRT in 1996/97, with a further pounds 1.2bn in corporation taxes.

Comments