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OBR slashes North Sea tax revenue forecast OBR slashes North Sea tax revenue forecast
(about 2 hours later)
The UK's budget watchdog has slashed its long-term forecast for North Sea oil and gas tax receipts. The UK's budget watchdog has slashed its long-term forecast for North Sea oil and gas tax receipts by 94%.
The Office for Budget Responsibility (OBR) estimated that a total of £2.1bn would be raised in the 20 years to 2040-41.The Office for Budget Responsibility (OBR) estimated that a total of £2.1bn would be raised in the 20 years to 2040-41.
That is about £34.5bn lower than it estimated last year, and less than the tax revenue from last year alone.That is about £34.5bn lower than it estimated last year, and less than the tax revenue from last year alone.
The OBR said its new forecast reflected in part lower oil and gas prices and a revision down of expected production.The OBR said its new forecast reflected in part lower oil and gas prices and a revision down of expected production.
Its Fiscal Sustainability Report stated: "Our latest projection shows that the effect of lower oil and gas prices and production has been partly offset by lower expenditure to leave the implied pre-tax profits from the North Sea positive, but relatively low.Its Fiscal Sustainability Report stated: "Our latest projection shows that the effect of lower oil and gas prices and production has been partly offset by lower expenditure to leave the implied pre-tax profits from the North Sea positive, but relatively low.
"The effects of accumulated losses reducing the effective tax rate paid by companies in the North Sea, plus the repayments associated with decommissioning costs, mean that in our central projection just £2bn of receipts will be raised in total between 2020-21 and 2040-41.""The effects of accumulated losses reducing the effective tax rate paid by companies in the North Sea, plus the repayments associated with decommissioning costs, mean that in our central projection just £2bn of receipts will be raised in total between 2020-21 and 2040-41."
It added: "As we always stress, North Sea revenues have been the most volatile receipts stream and are subject to large forecast errors, even over the short term.It added: "As we always stress, North Sea revenues have been the most volatile receipts stream and are subject to large forecast errors, even over the short term.
"These projections are therefore subject to considerable uncertainty."These projections are therefore subject to considerable uncertainty.
"It is quite possible that the industry's response to conditions that currently prevail could lead to very different outcomes.""It is quite possible that the industry's response to conditions that currently prevail could lead to very different outcomes."
'Significant reduction'
Responding to the forecast, Scottish Secretary David Mundell said it was "a very significant reduction" which highlighted the challenges facing the industry as a result of last year's steep fall in oil prices.
He added: "The UK government has already introduced a significant package of reforms to support the sector, worth £1.3bn, including reducing the headline tax rates and introducing a new Investment Allowance to reward companies investing in the UK Continental Shelf.
"That package is expected to lead to £4bn of additional investment and an increase in production by 15% by 2019-20."
A Scottish government spokeswoman said: "The OBR themselves state that these projections are 'subject to considerable uncertainty' - and the figures reflect recent low oil prices, which some forecasters have predicted will bounce back to higher levels over the longer term.
"Oil and Gas UK estimate that there are up to 23 billion barrels of oil and gas still to be recovered from the North Sea.
"The key to supporting the industry in the long term and maximising the recovery rates of remaining reserves is ensuring a stable and supportive fiscal and regulatory regime is put in place and maintained.
"That is why it is important that the Emergency Budget in July retains and builds upon the measures announced in the March Budget."