The tension between oil companies and George Osborne surrounding North Sea oil taxes has deepened.
But Statoil’s decision to put two projects on hold represents only one part of this clash. The other is from investors, who warn that it is not just current projects that are under threat, but long-term investment.
George Osborne, the UK chancellor, has just announced his tax measures for the next year, and the biggest surprise came with a cut to fuel duty, to be funded by extra charges on North Sea oil producers if the oil price remains over a certain price somewhere around $75 a barrel. The supplementary charge for such companies will now go from 20 per cent to 32 per cent.
So the North Sea’s big oil and gas producers must be suffering, right? Well, no.
For the big companies this means little – the North Sea is a declining asset, which will not mean much in the long term, and the £2bn raised altogether from this tax is nothing compared to their incomes (for comparison, Shell’s pre-tax net income last year was $35.3bn, about £21.7bn). That’s why their share price hasn’t budged in reaction.