THE oil industry yesterday played its latest hand in the ''game of poker'' with the Government in which the stake is the offshore tax regime.
At the weekend Chancellor Gordon Brown made it known he was unconvinced by the arguments that increased taxes, which he wants to fund health and education, could cost 50,000 jobs.
Yesterday the United Kingdom Offshore Operators' Association published the results of a study which confirmed their belief that, even with the tax regime as is, at $14 per barrel the UK lags countries such as Norway, the United States, Angola, Indonesia and Australia as an attractive place for the global operators to invest money.
The report incorporates a study by Petroconsultants who, having been commissioned by the Government, told them that by comparison the UK tax system was one of the most investor-friendly in the world and indicated there might be capacity for increased taxation.
However, UKOOA have asked them to take their research further and the results are very different.
The new report showed that even without any tax rise the economics of investing in UK offshore exploration are a fine calculation.
UKOOA said the report highlights that maintaining the success rate in discovering commercial fields is even more challenging in a maturing province and the hostile environment of the North Sea, coupled with diminishing field sizes, raises costs to some of the highest levels anywhere in the world.
Susan Hodgshon, vice-president of Petroconsultants' economics and policy analysis group, said: ''Most comparisons of global fiscal regimes, including ours, show the current UK system as one of the most investor-friendly in the world, considering its impact on the economics of new field developments after a discovery has been made.
''However, when a full analysis of the risks associated with discovering these developments is added, as it was in this study, it is clear that such returns are required if future exploration is to prove viable to an existing operator in a high cost, mature area such as the North Sea.''
The report said the consequences of increasing the tax should not be underestimated.
''An increase in taxation is expected to result in a rapid reduction in investment levels in the UK oil and gas sector.''
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