Supermajors lukewarm on North Sea investment

International supermajors to keep investing in the North Sea - for now

George Osborne's shock 12% tax hike has drawn criticism from North Sea producers. GETTY IMAGES
George Osborne's shock 12% tax hike has drawn criticism from North Sea producers. GETTY IMAGES

BP will proceed with all its current North Sea projects despite Britain hiking taxes for oil producers, accoring to a Reuters report of evidence given the the UK  Energy and Climate Change Committee on Tuesday.

However, BP will look closely at its other plans, while rival oil major Shell said it is evaluating its UK portfolio.

"None of the immediate projects that BP have coming off the blocks now will be stopped as a result of the tax increase, but clearly we need to look very hard at the viability of some others," BP's UK head Peter Mather told the Committee on Tuesday.

BP said in April it was taking a $683 million writedown on its UK North Sea assets as a result of the hike. The company has been looking eastwards since the Macondo disaster last year, with huge investments in Azerbaijan and Oman.

Shell Vice President David Loughman said the company was reassessing its plans following a 12 percent rise in the supplementary tax change imposed by the British Chancellor, George Osborne, in March, according to Reuters. The tax rate on North Sea oil profits is now 32%, up from 20%.

"We're evaluating the portfolio at the moment in the context of the change," Loughman said, adding that smaller fields are most likely to be challenged by the change to the fiscal rate.

In the wake of the unexpected tax hike, Norway's Statoil announced it was suspending $10 billion worth of projects.

Mather warned the committee, who were meeting to discuss the security of the UK's fossil fuel supplies, that the government must stick to its pledge to reverse the higher tax rate if the oil price falls below $75 per barrel, according to Reuters.

"Whilst prices are a little bit higher than they have been, they could well come down and I think this level of taxation with lower oil prices would be very bad for the North Sea," he said.

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